Vietnam urged to prepare for no-ODA period

VietNamNet Bridge - Vietnam needs to draw up a long-term plan to stop receiving ODA within 15-20 years, experts say. As of June this year, it is no longer receiving preferential loans from WB.


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Economists have a positive outlook for Vietnam’s medium- and long-term development with GDP predicted at above 6 percent. 

With acceptable financial risks and moderate foreign debts (though foreign debt has been increasing rapidly since 2015), and GDP increasing by twofold within eight years, Vietnam is among the fastest-growing countries.

However, Cretendo warned that on the path of becoming an Asian tiger with an open and export-oriented economy like Singapore and South Korea, Vietnam will bear some disadvantages. One is that WB has stopped providing preferential loans to Vietnam.

Sebastian Eckardt from WB commented that Vietnam will have to rely more on the bond market and join the group of emerging securities which have been receiving high attention from international investors in recent years.

With acceptable financial risks and moderate foreign debts (though foreign debt has been increasing rapidly since 2015), and GDP increasing by twofold within eight years, Vietnam is among the fastest-growing countries.

The fact that WB and ADB have stopped providing preferential loans in the context of Vietnam’s weak public finance situation (public debt is relatively high and has been increasing) and the fragile banking system is a bad sign. This has contributed to Vietnam’s risk rating for the medium- and long-term, which remains high compared to the short term.

In principle, when a country develops to a certain level, it needs to consider stopping ODA. However, is this the right time for Vietnam, and if so, will there be still latent risks?

Vietnam began receiving ODA in 1970s and while it has been receiving most ODA since 1993. The ODA per capita was $22 in 2000, while the figure rose to $46 in 2014. 

Experts said it is the right time for Vietnam to set up a plan on terminating receiving ODA in 15-20 years. This means that from now, Vietnam has to gradually reduce the ODA before the ODA per capita level falls to zero by the 2030s.

Vietnam has considered ODA an important support for its socio-economic development. Reports show that total ODA and preferential loans in 2016-2020 would be $39.5 billion.

The total undisbursed ODA capital and preferential loans in signed programs carried forward from the 2011-2015 to 2016-2020 periods is estimated at $22 billion. 

The longest term loan for Vietnam will become mature in 2055. This means that Vietnam will continue to pay debts for ODA over the next 40 years. 

Le Chi Mai from the National Academy of Public Administration said Vietnam needs to have thorough preparation for the no-ODA period to avoid disorder in the economy.


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Mai Thanh

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