The disbursement rate of official development assistance (ODA) capital and concessional loans between January and September of the year of localities is still low, Deputy Minister of Finance Tran Xuan Ha said at an online conference on October 7.

The online conference at the Ministry of Finance and localities in October, 7, 2021

The disbursement rate of ODA in 2021 of localities only reaches 36.5%

At the online conference, Deputy Minister Tran Xuan Ha said that the disbursement rate between January and September was 9.82%. This will affect the country's socio-economic development tasks and the implementation of the fiscal and budgetary tasks in 2021.

2021 is the first year of the 2021-2025 term, the low rate of disbursement will affect 2022 and the following years.

The Deputy Minister said that localities should propose solutions, including proposals to ministries and central government agencies. The Ministry of Finance will base on the proposals of localities to report to the Prime Minister.

According the ministry’s report, total public investment capital plan from ODA and foreign concessional loans allocated to localities in early 2021 is VND63,709 billion.

According to Deputy Director of the Department of Debt Management and External Finance under the Ministry of Finance Hoang Hai, the disbursement of ODA capital in the central budget only meets 11.51% of the estimate and on-lending in localities is 7.78%.

Based on the implementation of projects using ODA loans and concessional loans, the Ministry of Finance expects that the ODA disbursement rate for the whole year 2021 of localities will only reach 36.5% of the allocated capital plan.

The Ministry of Finance said that besides the impact of the Covid-19 pandemic, the delay in completing procedures for adjusting investment in-principle, projects, loan agreements, the disbursement moves at a snail’s pace due to the slow and insufficient allocation of medium-term public investment plan, even the allocation beyond the registered use demand. During the completion of disbursement procedures, the implementation of the application for capital withdrawal is slow.

At the conference, Vice Chairman of Hanoi People's Committee Ha Minh Hai said that Hanoi implemented seven ODA projects in 2021 with a total capital of about VND8,000 billion. Between January and September, Hanoi’s disbursement rate was 17.4%.

Regarding difficulties of localities in the disbursement process, due to the application of social distancing measures under Directive 16, so construction works had to be suspended; problems related to site clearance also faced obstacles; the price of construction materials from the beginning of the year until now increased; the import of equipment of a number of foreign projects and bidding packages was delayed, Vice Chairman Ha Minh Hai said.

The leader of Ha Noi city proposed the Ministry of Finance and the Ministry of Planning and Investment to soon adjust the allocated ODA, complete the decree replacing Decree 56 on management and use of ODA capital to simplify some procedures.

He also asked the Ministry of Finance, the Ministry of Planning and Investment, the Ministry of Construction, and the Ministry of Transport to remove obstacles for the city in implementing ODA projects and limiting disputes with contractors; and implement capital allocation consistent with actual demand.

Adjusting capital plan in accordance with the actual needs of the locality

According to Deputy Minister of Finance Tran Xuan Ha, besides the impacts of the Covid-19 pandemic, the subjective reasons of the governing agencies, project management boards still is the main cause for the slow disbursement, leading to the delay in compensation for site clearance, development of bidding documents, and organization of bidding. Accordingly, the Deputy Minister suggested that localities must quickly implement these procedures.

“From now to the end of the year, localities must review their disbursement ability, and propose to reduce the capital plan to the Ministry of Planning and Investment and the Ministry of Finance for the city to report to the Prime Minister. If the project in each province or city can be disbursed, those can actively allocate capital and request the investors, the Project Management Board to coordinate with the sponsor to complete the projects. If there are any obstacles in the spending control or processing capital withdrawal applications, localities can report to the Ministry of Finance for urgent solutions,” said Deputy Minister Tran Xuan Ha.

According to the Ministry of Finance, to expedite disbursement, the Ministry has completed submitting to the Government for promulgation Decree 79/2021 dated August 16, 2021 amending and supplementing a number of articles of Decree 97/2018 on on-lending, including regulations on the value of collateral for on-lending to public service delivery units, and reduction of the on-lending rate for some localities suffering difficulties in balancing local budgets and provinces in the Mekong Delta implementing projects to combat climate change.

The ministry also commits to control spending within three working days and process capital withdrawal applications (direct withdrawal) within one working day from the date of receipt of valid applications.

The ministry also proposed the Ministry of Planning and Investment to simplify or shorten the process of adjusting investment in-principle for cases that the time limit for implementing projects is extended.

The Ministry of Planning and Investment is asked to adjust the report process to the Prime Minister and amend the capital plan in accordance with the actual demand of localities, and attach the additional capital plan for local budget with the estimate of on-lending from ODA, concessional loans of localities to comply with Government Decree 56/2020.

Localities are required to review the reallocation of the estimate in accordance with the project implementation progress, if the official application for adjusting capital plan 2021 is not issued.

Localities can actively adjust the estimate within their competence and report to the Ministry of Planning and Investment and the Ministry of Finance if the assigned estimate needs to be reduced. The remaining capital should be allocated in line with the financial mechanism of the projects implemented in the localities.

In addition, localities need to closely work with the Ministry of Planning and Investment, the Ministry of Finance and relevant agencies to expedite the progress of adjusting investment in-principle and loan agreements, and prevent the adjustment from affecting to the progress of implementation and disbursement of projects.