Vietnam earmarks some US$1 billion every year for repaying official development assistance (ODA) loans, one Ministry of Finance agency said on Tuesday.
The $1 billion annual loan repayment covers both principal ODA debt and interest, Hoang Hai, deputy head of the ministry’s agency for debt management, told a meeting in Hanoi.
Vietnam’s ODA loans topped $45 billion in the 2005-15 period, with the funds mostly allocated to infrastructure development, healthcare, education and agricultural sectors, according to the official.
Hai admitted that Vietnam is currently forced to take on new debts to repay the old ones, but added that this is common practice also used by such countries as the U.S. or Japan.
The official said that the ODA repayment is still modest compared to the money Vietnam spends on repaying domestic debts.
As of the end of last month, Vietnam had spent VND176.8 trillion ($7.89 billion) on repaying debts of all types this year, with domestic debts accounting for VND140 trillion ($6.25 billion), Hai said.
Tuesday’s meeting was held by the debt management agency to brief all relevant bodies on ODA distribution plans, particularly after mid-2017, when Vietnam is no longer able to enjoy favorable ODA loans.
With Vietnam officially becoming a middle-income country in 2010, many donors have reduced loans to the Southeast Asian country, and switched to granting mixed loans instead of pure ODA.
Beginning July 2017, Vietnam will no longer be able to enjoy preferential ODA loan conditions, but will have to borrow at higher interest rates and narrower terms.
The new interest rates could be 2 to 3.5 percent higher than before and repayment terms could be halved, according to the debt management agency.