(Chinhphu.vn) Ms. Thuy Dung's company (HCMC) has 100% foreign investment capital. The company has a loan from the parent company, when receiving the loan, it hedged the exchange rate for the principal at a future date. However, due to unfavorable cash flow, the company did not have enough money to pay the debt on the maturity date of the foreign currency contract.

Ms. Dung asked, can the company get a new short-term loan to pay off the old loan on the maturity date of the foreign currency contract?

Regarding this issue, the State Bank of Vietnam has the following opinions:

According to Clause 1 and Clause 4, Article 17 of Circular No. 08/2023/TT-NHNN dated June 30, 2023 of the Governor of the State Bank of Vietnam stipulating the conditions for foreign loans not guaranteed by the Government, the purpose of short-term foreign loans and documents proving the purpose of foreign loans for borrowers that are not credit institutions or foreign bank branches are as follows:

"1. Purpose of short-term foreign loans:

a) The borrower may only use short-term foreign loans to restructure foreign debts and pay short-term debts payable in cash (excluding principal debts of domestic loans) of the borrower. Short-term debts payable specified in this Clause are debts arising in the process of implementing investment projects, production and business plans, and other projects of the borrower and are determined based on the provisions of law current guidance on the corporate accounting regime;

... 4. The foreign borrower must demonstrate the purpose of the foreign loan through:

... c) Debt restructuring plan as prescribed in Article 8 of this Circular in case of foreign loans restructuring foreign debt".

Clause 6, Article 3 of Circular No. 08/2023/TT-NHNN stipulates: "Foreign debt restructuring is the repayment of existing foreign debt from new foreign loan capital".

Pursuant to Clause 1, Article 8 of Circular No. 08/2023/TT-NHNN: "1. Foreign debt restructuring plan (hereinafter referred to as "Debt restructuring plan") is a synthesis of information on the use of new foreign loans to repay existing legal foreign loans. The debt restructuring plan of the borrower must be approved by a competent authority in accordance with the provisions of law".

Based on the above references, enterprises are allowed to borrow short-term foreign loans to repay existing legal foreign debts. In the process of implementing foreign loans, enterprises are responsible for complying with regulations on foreign loan management and repayment and other relevant legal regulations.