What are regulations on ODA loan according to the law in Vietnam?

1. What are regulations on ODA loan according to the law in Vietnam?

Borrowing means the process of creating debt obligations through the conclusion and performance of a loan treaty, contract or agreement (hereinafter referred to as loan agreement) or issuing debt instruments.

Pursuant to Clause 5 Article 3 of the Law on Public Debt Management in 2017 stipulating definition of ODA loan:

ODA loan (Official Development Assistance loan) means an external loan with a grant element of at least 35% (in case of conditional loan relating to procurement of goods and services as prescribed by the foreign donor) or at least 25% (in case of unconditional loan).

Grant element means a percentage of loan’s face value, reflecting the concessionality of the loan, calculated on the basis of currency, maturity, grace period, interest rate, other related fees with the discount rate equivalent to the loan interest of Vietnamese Government on the market determined when the grant element is calculated.

What are regulations on ODA loan according to the law in Vietnam? - image from internet

2. What are regulations on ODA loans, external concessional loans in Vietnam?

Pursuant to Article 29 of the Law on Public Debt Management in 2017 stipulating ODA loans, external concessional loans in Vietnam:

- Ministries, regulatory bodies, and local governments shall make programs and projects for using ODA loans or external concessional loans as prescribed in this Law and relevant law provisions.

- A program/project for using ODA loans or external concessional loans shall at least contain:

+ Necessity, objectives, and scope of the program/project;

+ Expected total sources of funds and proportion thereof, including external loans and reciprocal capital;

+ Loan amount, lender and loan terms and conditions (if any);

+ Proposed domestically operated financial mechanism; repayment source balance plan;

+ Expected results of the program/project.

- The Ministry of Finance shall determine grant element, evaluation of impact of new loan on indicators of public debt safety, and domestically operated financial mechanism, and then have them and the program/project for using ODA loans or external concessional loans considered by the Prime Minister for approval.

- According to the approval of the Prime Minister, the governing body shall prepare a pre-feasibility study report or a report on program/project for using ODA loans or external concessional loans, and then submit it to the authority competent to decide investment policies as per the law.

- According to the investment policies on program/project for using ODA loans or external concessional loans approved by competent authority, the government body shall prepare a feasibility study report and then submit it to the authority competent to decide investment as per the law.

- The State President, the Government and the Prime Minister has the power to negotiate and conclude an ODA or external concessional loan agreement as follows:

+ The Government shall submit a loan agreement in the form of international treaty in the name of the State to the State President for negotiation, conclusion, and ratification;

+ The Prime Minister shall negotiate and conclude a loan agreement in the name of the Government.

- The conclusion of an ODA loan or external concessional loan agreement is considered qualified when the following conditions are fulfilled:

+ all of investment procedures are completed as per the laws; and

+ the ODA loan or external concessional loan agreement has been approved by the competent authority.

- ODA loans or external concessional loans must be allocated and used closely and effectively in the following rules:

+ Give grants to programs and projects eligible for state funding;

+ Given on-lent loans to People’s Committees of provinces, public sector entities, and enterprises.

- The Government provides guidelines for management of ODA loans and external concessional loans.

Best regards!