ODA interest rates for Vietnam may increase to 2%-3.5% starting from next July as preferential ODA loans end.

ODA interest rates to increase

Hoang Hai, Deputy Director General of the Ministry of Finance's Debt Management and External Finance Department said in his report about ministry's ODA projects.

"Since 2010, Vietnam has become a lower middle-income country, that's why preferential treatments for us are decreasing. In July 2017, the World Bank will hold meetings to decide if Vietnam and several other countries can still access ODA preferential loans. It's likely that our loans will be cut," he said.

Before 2010, the average repayment period was 30 to 40 years with borrowing costs between 0.7% and 0.8% per year, including a grace period. Now the repayment period has been reduced to 10 to 25 years and the borrowing costs set at 2%.

As Vietnam gains lower middle-income status while public debt is increasing, many partners are also changing the terms of their loans to Vietnam or are turning to mixed funding.

According to the Ministry of Finance, from 2005 to 2015, Vietnam had signed a total of USD45bn of ODA loans and another USD15.66bn was signed in the first nine months of 2016. 

Early debt repayment limits for domestic loans are USD2.6bn and USD443m for foreign loans. ODA loans are mostly used to develop the infrastructure, agriculture and reduce poverty.

Hai said the rollover rate was still in accordance with the laws on the state budget and public debt management as well as the loans and repayment plans for 2016.

Dtinews