By July 2017, the Government will have changed the way it allocates official development assistance (ODA) loans. Instead of receiving an ODA allotment, local-level administrations will have to borrow the loans from the government and be in charge of repaying the money to the lending countries. Trương Hùng Long, director of the Ministry of Finance’s Debt Management and External Finance Department spoke with Kinh te&Do thi (Economic and Urban affairs) newspaper about the changes.

ODA loan money has mainly been allocated to localities for numerous infrastructure projects. What does this lead to?

Foreign loans have contributed to the socio-economic infrastructure in past years. However, the mechanism, which mainly distributed the money to local administrations from the State budget with the State in charge of repaying the loans, resulted in many problems.

The easy access to the money led many localities to spreading the money on costly projects. Most of them progress slowly and require more than the initial investment capital. Investors were not encouraged to use the money effectively.

The money allotment among localities remains improper and inadequate as the capacity of accessing the loans of disadvantaged and mountainous localities is usually lower than that of big cities.

In order to strengthen management and improve the efficiency of public debt use, the Government has issued Directive 02 / CT-TTg to enhance the re-paying of the loans to local-level administrations and local-level administrations will use their own budgets to repay the debts.

Have local administrations reacted to the new mechanism?

People are usually hesitant when a policy changes from money allotments to loans. But I think we should go ahead to help local administrations form management thinking. The key is to force local administrations to control the debt and increase the effective use of ODA.

So how will the obligation of localities to repay under the new allotment rule be implemented?

Under the State Budget Law, which took effect last year, along with legal papers of the Ministry of Finance, the borrowing and repayment of debts in localities will be allocated from local budgets and the recovery of investment capital of projects that used ODA loans.

To determine a certain loan, the People’s Councils of the cities and provinces must overhaul the purposes of the loan, its feasibilities and effectiveness, and the capacity of repayments of localities annually. Based on that, local authorities make a final decision whether to implement it or not.

In case the borrowers are local administrations, we will directly inspect the above things.

How will agencies inspect the debts when the new allotment rules take effect?     

I think a new unit in charge of controlling local debts can deal with the issue. At local levels, this unit is currently the Department of Finance.

However, the most important thing when setting up such a unit is to establish information channels among localities to assure fairness, consistency and transparency in loans.

. -- VNS