Vietnam will not be able to borrow official development assistance (ODA) at preferential interest rates and terms come July, the Ministry of Finance confirmed on Wednesday.

Under the new scheme, the Southeast Asian country will pay higher interest rates for loans with shorter repayment terms, Nguyen Xuan Thao, deputy head of the ministry’s debt management agency, told reporters at a meeting in Hanoi.

“Since Vietnam officially became a middle-income country in 2010, many donors have significantly reduced their preferential treatment for loans to Vietnam,” Thao explained.

According to the debt management agency, 98 percent of Vietnam’s foreign loans in recent years are in the form of ODA with preferential conditions. The ODA interest rates average only 1 to 1.5 percent per year.

Vietnam should expect to pay more, and faster, for loans from the World Bank, the Asian Development Bank, and Japan – its biggest donor – from July.

The debt management agency revealed last year that the new interest rates could rise by 2 to 3.5 percent higher while repayment terms could be halved.

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