Vietnam: What are the revenues and expenditures of the Debt repayment fund?

Vietnam: What are the revenues and expenditures of the Debt repayment fund? (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. What is the Debt repayment fund?

According to Clause 1, Article 56 of the Law on Public Debt Management 2017, Debt repayment fund is established by the Government to ensure capacity to repay debts arising from loans to be on-lent and loan loss reserves arising out of on-lending and sovereign guarantees.

2. What are the revenues and expenditures of the Debt repayment fund in Vietnam?

Specifically, in Article 7 of Decree 92/2018/ND-CP, the revenues and expenditures of the Debt repayment fund are as follows:

(1) Contents of revenues of the Accumulation Fund for debt repayment:

- Recovery of on-lending debt (including principal, interest, penalty interest, and fees).

- Collection of risk provisions for on-lending.

- Collection of on-lending management fee (the part of the Ministry of Finance entitled to it according to the Government's Decree on on-lending of official development assistance (ODA) loans and foreign concessional loans of the Government)

- Guarantee fee and late payment penalty interest for the guarantee fee (if any).

- Recovery of capital advances from the Accumulation Fund for debt repayment.

- Revenue from debt restructuring and debt portfolio.

- Collect interest on deposits, loans, and entrustments for capital management and investment in the Accumulation Fund for debt repayment.

- Other lawful revenues.

(2) Contents of expenditures of the Accumulation Fund for debt repayment:

- Payment of foreign debt (principal, interest), and fees (if any) for loans on-lending. Where the state budget has advanced sources for payment of foreign debts, the debt payment accumulation fund shall be responsible for repaying the advanced part to the state budget.

- Advance capital to pay foreign debts for loans on-lending or Government guarantees under the Prime Minister's decision.

- Expenses for risk treatment under the Prime Minister's decision.

- Expenses for public debt management from the collection of on-lending management fees and guarantee fees according to the Prime Minister's regulations on the principle that they do not overlap with the recurrent expenditure estimates guaranteed by the state budget.

- After balancing and using for the expenses specified at Points a, b, c, and d, Clause 2, Article 7 of Decree 92/2018/ND-CP, the Fund is allowed to use temporarily idle capital to lend to the state budget, invest idle capital, and buy government bonds in accordance with the provisions of the Law on Public Debt Management 2017 and Decree 92/2018/ND-CP.

3. What are the uses of the debt repayment fund in Vietnam?

The debt repayment fund is used to:

- Repay loans to be on-lent to state budget and external loans;

- Advance funds for guaranteed borrowers of sovereign guarantee when they default on the debt;

- Advance funds for debt restructuring, restructuring portfolios of government debts and sovereign-guaranteed debts according to the scheme approved by competent authority;

- Finance expenditures on responses to risks arising from ODA on-lent loans or external concessional loans and sovereign guarantees as decided by the competent authority;

- Finance expenditures on public debt management transactions as decided by the Prime Minister.

(Clause 4, Article 56 of the Law on Public Debt Management 2017)

4. Principles of management and use of the debt repayment fund in Vietnam

The management and use of the debt repayment fund must ensure the principles specified in Article 4 of Decree 92/2018/ND-CP, specifically as follows:

- Ensuring publicity, transparency, and compliance with the provisions of the law; ensuring safety, liquidity, and efficiency in the management and use of capital of the Accumulation Fund for debt repayment.

- Linking the management of the Accumulation Fund for debt repayment with public debt management, ensuring the solvency of loans on-lending, and handling risks arising from on-lending and government guarantees.

- All expenditures from the Accumulation Fund for debt repayment shall be made according to the decision of the competent authority, a foreign loan agreement, or a contract signed between the Ministry of Finance and the recipient of capital from the debt repayment fund, depending on the nature of the loan and the characteristics of each expenditure specified in Decree 92/2018/ND-CP.

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