Chapter IV
MANAGEMENT OF THE GOVERNMENT LOANS AND REPAYMENT THEREOF
Article 25. Purposes of the Government's loans
1. Financing budget deficit for development investment but not recurrent expenditures.
2. Financing temporary central budget deficit and ensure the liquidity of sovereign bond market.
3. Paying due principal and restructuring Government debts.
4. Grant ODA on-lent loans or external concessional loans to People’s Committees of provinces, public sector entities and enterprises.
Article 26. Forms of Government loans
1. Forms of Government loans include:
a) Issues of debt instruments;
b) Conclusion of loan agreements.
2. The Government may borrow in local and foreign currencies, precious metal or goods of local or foreign currency equivalence.
Article 27. Issues of debt instruments in domestic capital market
1. Debt instruments of the Government include:
a) Sovereign bonds;
b) Treasury bills;
c) Development bonds.
2. According to an annual public borrowing and repayment plan, the Ministry of Finance shall issue debt instruments of the Government.
3. The process for issuing debt instruments shall be through bidding, underwriting or private placement.
4. Total the Government loans shall be included in the central budget. The Government must set aside an enough sum of money to repay principal, interests, and other related expenses on a due debt.
5. The Government sets forth issues, registration, deposit, listing and dealings of debt instruments of the Government in the securities market.
Article 28. Issues of sovereign bonds in the international capital market
1. The Government issues sovereign bonds in the international capital market to finance central budget deficit for development investment as prescribed in the Law on State budget and debt structuring of the Government.
2. According to annual state budget estimates and annual public borrowing and repayment plan, the Ministry of Finance shall submit a scheme for issuing sovereign bonds in international capital market to the Government for approval.
3. A scheme for issuing sovereign bonds in international capital market shall at least contain:
a) Necessity of issues of sovereign bonds in the international capital market;
b) Demand for and capacity to raise funds, domestic macro economy, Vietnam’s credit rating and international capital market;
c) Types of processes for bond issuance, amount, terms, expected interest rates, currency, and market;
d) A plan for using raised capital;
dd) Evaluation of loan efficiency and impact of the new loan on public debts, and indicators of public debt safety.
4. The Ministry of Finance shall implement the scheme approved by the Government, the decision of the Prime Minister on issue of sovereign bonds in the international capital market.
Article 29. ODA loans, external concessional loans
1. Ministries, regulatory bodies, and local governments shall make programs and projects for using ODA loans or external concessional loans as prescribed in this Law and relevant law provisions.
2. A program/project for using ODA loans or external concessional loans shall at least contain:
a) Necessity, objectives, and scope of the program/project;
b) Expected total sources of funds and proportion thereof, including external loans and reciprocal capital;
c) Loan amount, lender and loan terms and conditions (if any);
d) Proposed domestically operated financial mechanism; repayment source balance plan;
dd) Expected results of the program/project.
3. The Ministry of Finance shall determine grant element, evaluation of impact of new loan on indicators of public debt safety, and domestically operated financial mechanism, and then have them and the program/project for using ODA loans or external concessional loans considered by the Prime Minister for approval.
4. According to the approval of the Prime Minister, the governing body shall prepare a pre-feasibility study report or a report on program/project for using ODA loans or external concessional loans, and then submit it to the authority competent to decide investment policies as per the law.
5. According to the investment policies on program/project for using ODA loans or external concessional loans approved by competent authority, the government body shall prepare a feasibility study report and then submit it to the authority competent to decide investment as per the law.
6. The State President, the Government and the Prime Minister has the power to negotiate and conclude an ODA or external concessional loan agreement as follows:
a) The Government shall submit a loan agreement in the form of international treaty in the name of the State to the State President for negotiation, conclusion, and ratification;
b) The Prime Minister shall negotiate and conclude a loan agreement in the name of the Government.
7. The conclusion of an ODA loan or external concessional loan agreement is considered qualified when the following conditions are fulfilled:
a) all of investment procedures are completed as per the laws; and
b) the ODA loan or external concessional loan agreement has been approved by the competent authority.
8. ODA loans or external concessional loans must be allocated and used closely and effectively in the following rules:
a) Give grants to programs and projects eligible for state funding;
b) Given on-lent loans to People’s Committees of provinces, public sector entities, and enterprises.
9. The Government provides guidelines for management of ODA loans and external concessional loans.
Article 30. Other domestic loans
1. Other domestic loans of the Government shall be applied in accordance with the decision of the competent authority or loan agreement, including:
a) Loans borrowed from financial reserve fund of the State according to decisions of competent authorities in accordance with the Law on State budget;
b) Loans borrowed from off-budget financial fund, state funds, loans borrowed from financial institutions or credit institutions in accordance with loan agreement.
2. The loan agreement shall be made in the form of a loan contract, at least containing: loan amount, loan term, interest rate and other charges associated with the loan, options for repayment method, repayment period, extension, and late payment fines (if any), rights and responsibilities of contractual parties, other terms and conditions relating to the loan.
3. According to the annual state budget estimates ratified by the National Assembly and the annual public borrowing and repayment plan approved by the Prime Minister, the Ministry of Finance shall:
a) Request the Prime Minister to apply for a loan borrowed from financial reserve fund of the State to finance the budget deficit as prescribed in the Law on State budget. The Ministry of Finance shall decide a loan with the repayment plan within the year;
b) Decide a loan borrowed from state funds as prescribed in the Law on State budget; or a loan borrowed from debt repayment fund as prescribed in Clause 5 Article 56 of this Law;
c) Negotiate and conclude a loan agreement with the off-budget financial fund, a financial institution, or a credit institution.
Article 31. Use of the Government's loans
1. If a program/project is eligible for state funding, the procedures below shall be followed:
a) Expenditures of the program/project eligible for funding from central budget shall be included in expenditure estimate of central budget, which shall then be submitted to the National Assembly for ratification;
b) Dedicated additional loans for local budget shall be included in expenditure estimate of local budget, which shall then be submitted to the National Assembly for ratification;
c) Expenditures of the program/project eligible for funding from local budget shall be included in the expenditure estimate of local budget, which shall then be submitted to the People’s Council of province for ratification.
2. In case of end borrowers, the Ministry of Finance shall appraise and conclude or authorize a bank for social policies/credit institution to appraise and conclude an on-lent loan contract as prescribed in this Law.
Article 32. Repayment of government debts
1. The Government shall set aside an amount in central budget to repay government debts. The National Assembly shall ratify the new loan amount to pay off the principal in the total loan of annual state budget.
2. The People’s Committee of province shall set aside an amount in local budget to pay off ODA on-lent loans and external concessional loans in full and on schedule.
3. The Ministry of Finance and an intermediary borrower authorized by the Ministry of Finance must recover such an amount of principal, interests, and other related fees associated with programs and projects for ODA on-lent loans and external concessional loans, and then deposit the amount to the debt repayment fund to ensure external loan repayment.
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