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| Can Tho bridge, built with ODA from the Government of Japan and counterpart funding from the Government of Vietnam__Photo: Tuan Anh/VNA |
The Ministry of Finance (MOF) has released a draft Law Revising the 2017 Law on Public Debt Management, aiming to enhance the power decentralization, further simplify administrative procedures, and expand eligibility for official development assistance (ODA) and foreign concessional loans.
Greater decentralization and simpler procedures
In line with the State’s ongoing efforts to promote the power decentralization and improve the governance efficiency, the draft grants more authority to the Prime Minister and the Ministry of Finance in the public debt management. It also empowers local administrations with greater autonomy and accountability in budget expenditure decision-making.
Under the draft, provincial authorities would no longer need to seek MOF’s approval of local government bond issuance terms and conditions, including bond volume, denomination, currency, and maturity. Instead, provincial-level People’s Committees would submit their bond issuance schemes directly to provincial-level People’s Councils for approval, provided total borrowing remains within the limits endorsed by the National Assembly.
To further simplify procedures for ODA- or concessional loan-funded projects, ministries, provincial-level People’s Committees, state enterprises and wholly state-owned subsidiaries would be allowed to prepare and submit loan proposals directly to the MOF for appraisal before submission to the Prime Minister.
A loan proposal would focus on such core elements as the estimated foreign loan amount, expected lender, intended loan use purpose, proposed domestic financial mechanism, and plan on arrangement of sources for loan repayment. This new approach would significantly reduce documentation requirements compared to the current multi-layered process.
The draft also specifies a clear time limit for the Prime Minister to approve the annual public debt borrowing and repayment plan, ensuring alignment with the national budget estimates, public investment plans, and debt management schedules.
In order to further shorten the processing time and simplify relevant administrative procedures, the Government proposes revising the on-lending appraisal process by authorizing the MOF to assess the borrowing capacity of provincial-level People’s Committees, instead of following current multi-step appraisal procedures.
Expanding eligibility for concessional loans
To improve the legal framework and address existing bottlenecks in the capital mobilization, the draft proposes fully allocating ODA and concessional loans as grants to provinces that receive balancing transfers from the central budget. Meanwhile, financially self-sufficient provinces, public non-business units and enterprises would be required to borrow and repay loans instead of receiving full allocations.
Eligibility for on-lending would be expanded to include public non-business units that are able to ensure their recurrent expenditures and part of their investments, making them responsible for the effective use and repayment of borrowed funds.
For units that are not yet eligible for on-lending but are implementing ODA- or concessional loan-funded projects, the Government may still consider grant-based mechanisms to facilitate their project implementation.
To ease financial constraints for institutions lacking collateral, the draft proposes allowing public science and technology organizations and public higher education institutions to be exempted from collateral requirements when taking on-lent loans.- (VLLF)
