The Ministry of Finance is consulting the draft Decree amending and supplementing a number of articles of Decree No. 97/2018 / ND-CP dated June 30, 2018 on re-lending of the Government’s ODA loans and foreign incentives of the Government.

Illustrative photo. Source: internet. 

Classifying subjects to calculate value of collateral

The Ministry of Finance proposes to amend Clause 3, Article 16 on loan insurance in the direction of clearly classifyingre-lending subjects to calculate the minimum collateral.

Specifically, the value of the collateral shall be equal to a minimum of 120% of the original value of a re-lending loan if the borrower is an enterprise and value of the collateral is at least equal to 100% of the original value of the loan and if the borrower is a public service delivery unit, this value is 120%.

If the value of the collateral is reduced to be lower than 120% of the above rate, the borrower shall add more collateral to ensure the minimum rate.

Also regarding loan security, the Ministry of Finance only retains the regulation on not requiring loan security for re-lending as the provincial People's Committee.

Regarding the on-lending rate for the provincial People's Committee, the draft decree maintains the on-lending rate for localities that have additional balance rate from the central budget of the total local budget balance of 70%. However, the re-lending rate is adjusted to 10% of ODA and concessional loans instead of the current 30%.

For the re-lending rate for public service delivery units, the draft proposes to add contents: for public non-business units themselves ensuring all regular funding, the re-lending rate is 10% of ODA and concessional loans used for investment projects. In other special cases, the Prime Minister shall decide on appropriate re-lending rates.

Separating the re-lending process

The biggest change in this is the re-lending appraisal process with two separate processes for two re-lending subjects, which are localities and public service delivery units.

Regarding the re-lending to the provincial People's Committee, the province shall send a report on proposal of investment guidelines for a program or project together with the written assessmentfor repayment capacity of the local budget, and concurrently send to the Ministry of Finance a proposal for assessment of repayment of the local budget.

Within 15 days after receiving complete and valid documents, the Ministry of Finance shall provide the assessment results to the Ministry of Planning and Investment to assume the prime responsibility for reporting to the Prime Minister on the decision on the investment guidelines for the program or project.

After the feasibility study report of the project is approved by the competent authority, the Ministry of Finance shall report to the Government and the Prime Minister on the approval of re-lending together with the negotiation and signing of relending agreement.

If the investment guidelines of the program or project are adjusted, the provincial People's Committee shall send assessment documents to the Ministry of Finance to update the repayment capacity of the local budget.

Based on the updated result of the repayment capacity of the local budget, the Ministry of Finance shall report to the Prime Minister not to negotiate and sign foreign loans.

Regarding the re-lending to public service delivery units and enterprises, the process is similar to that of the re-lending to the provincial People's Committee. Specifically, after the feasibility report of the project is approved by the competent authority, the authorized representative of the borrower shall send a proposal on re-lending assessment, enclosed with assessment documents to the re-lending assessment agency.

Within 30 working days after receiving complete and valid documents, the re-lending assessment agency shall send to the Ministry of Finance the assessment report.

Within 15 working days after receiving complete and valid documents, based on the assessment report of the re-lending assessment agency, the Ministry of Finance shall report to the Government and the Prime Minister on approval or denial of the re-lending together with the negotiation and signing of re-lending agreements in accordance with the provisions of the Decree on management of ODA and foreign concessional loans.