DECREE
On on-lending of the Government’s foreign loans to People’s Committees of provinces and centrally run cities
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Pursuant to the June 19, 2015 Law on Organization of the Government;
Pursuant to the June 17, 2009 Law on Public Debt Management;
Pursuant to the June 18, 2014 Law on Public Investment;
Pursuant to the June 25, 2015, Law on the State Budget;
At the proposal of the Minister of Finance;
The Government promulgates the Decree on on-lending of the Government’s foreign loans to People’s Committees of provinces and centrally run cities.
Chapter I
GENERAL PROVISIONS
Article 1. Scope of regulation
1. This Decree prescribes the on-lending of the Government’s official development assistance (ODA) and concessional loans to People’s Committees of provinces and centrally run cities for:
a/ Implementing socio-economic development investment projects belonging to local budget spending tasks;
b/ Using as local contributions to public-private partnership projects.
2. The use of ODA and concessional loans of national target programs in accordance with the Law on Public Investment as support from the central budget to local budgets, and of emergency loans for response to natural disasters and catastrophes is not regulated by this Decree.
Article 2. Subjects of application
1. People’s Committees of provinces and centrally run cities (below referred to as provincial-level People’s Committees).
2. Agencies, organizations and persons responsible for monitoring and managing the on-lending of the Government’s ODA and concessional loans to provincial-level People’s Committees.
Article 3. Principles of on-lending
1. The on-lending of ODA and concessional loans to provincial-level People’s Committees must comply with this Decree and other relevant laws.
2. On-lent loans shall be fully repaid on schedule from local budgets and other lawful sources in accordance with law.
3. The financial mechanism, on-lending rate, project effectiveness and repayment capacity shall be calculated and determined when a provincial-level People’s Committee proposes investment policy for an ODA or concessional loan-funded program or project.
4. The on-lending of ODA and concessional loans to provincial-level People’s Committees must ensure publicity and transparency and be conformable with local budgets’ financial capacity.
Article 4. Conditions for provincial-level People’s Committees to borrow ODA and concessional loans under the on-lending mechanism
1. Having projects permitted by competent authorities to raise funds for investment in socio-economic development or projects to be partly funded by the local budget in the form of public-private partnership, belonging to local budget spending tasks and covered by the local medium-term public investment plan approved by competent authorities in accordance with the Law on Public Investment.
2. Projects to be allocated with counterpart funds for implementation in conformity with current regulations.
3. Total outstanding loans of the local budget at the time of appraisal of investment policy for programs or projects must not exceed the limit of outstanding loans of local budgets prescribed in the Law on the State Budget.
4. Having no loans on-lent by the Government overdue for more than 180 days.
5. The annual obligation to repay ODA and concessional loans of the provincial-level People’s Committee does not exceed 10% of the assigned local budget revenues at the time of considering the on-lent loan.
Article 5. On-lending rates of ODA and concessional loans
1. The on-lending rate of ODA loans for socio-economic development investment projects belonging to local budget spending tasks shall be proposed by provincial-level People’s Committees as follows:
a/ For a locality with budget-balancing transfers from the central budget accounting for over 70% of its total local budget expenditures, the on-lending rate shall be 10% of ODA loans;
b/ For a locality with budget-balancing transfers from the central budget accounting for between 50% and below 70% of the local budget expenditures, the on-lending rate shall be 20% of ODA loans;
c/ For a locality with budget-balancing transfers from the central budget accounting for less than 50% of the local budget expenditures, the on-lending rate shall be 30% of ODA loans;
d/ For localities with revenues transferred to the central budget (excluding Hanoi and Ho Chi Minh City), the on-lending rate shall be 50% of ODA loans;
dd/ Hanoi and Ho Chi Minh City shall be entitled to borrow 80% of ODA loans.
2. The on-lending rate of concessional loans for socio-economic development investment projects belonging to local budget spending tasks shall be proposed by provincial-level People’s Committees as follows:
a/ For localities with budget-balancing transfers from the central budget accounting for over 70% of the local budget expenditures, with districts on the list promulgated together with the Government’s Resolution No. 30a/2008/NQ-CP of February 28, 2008, the on-lending rate shall be 30% of concessional loans;
b/ For localities with budget-balancing transfers from the central budget other than those referred at Point a of this Clause, the on-lending rate shall be 70% of concessional loans;
c/ For localities with revenues transferred to the central budget, the on-lending rate shall be 100% of concessional loans.
3. The on-lending rate of ODA and concessional loans to be used as local contributions to private-public partnership projects shall be 70%.
4. The on-lending rate mentioned in Clauses 1, 2 and 3 of this Article shall apply to loan principals and interests according to the interest rate applicable to loans paid in time, and loan arrangement and management charges stated in the loan agreement with foreign parties.
For liabilities, including commitment charge, late payment interest, ahead-of-schedule loan payment charge and other costs arising from whole ODA and concessional loans, provincial-level People’s Committees shall pay them from their local budgets.
5. Before January 1 of the first year of the budget stabilization period, based on the ratio of budget-balancing transfers from the central budget to the local budget to the total local budget expenditures and ratio of revenues transferred to the central budget decided by the National Assembly for the first year of the budget stabilization period, the Minister of Finance shall announce the on-lending rates of ODA and concessional loans for each province and centrally run city as prescribed in Clauses 1 and 2 of this Article for the entire budget stabilization period.
For the 2017-2020 period, the Minister of Finance shall announce the on-lending rates of ODA and concessional loans for each province and centrally run city before the effective date of this Decree at the latest.
Article 6. On-lending financial provisions for provincial-level People’s Committees
1. The on-lending currency is the original currency stated in the foreign loan agreement. The debt recovery currency is the currency in which the loan is on-lent. In case a provincial-level People’s Committee pays in Vietnam dong, the selling rate of the on-lending foreign currency set by the servicing bank at the time of debt payment or by the Bank for Foreign Trade of Vietnam, if the serving bank has no such selling rate, shall be applied to recover the debt.
2. The on-lending interest rate and other charges will be equal to the levels specified in the foreign loan agreement.
Late payment interest shall be paid according to the higher of the following two levels: 150% of the on-lending interest rate or the late payment interest rate specified in the foreign loan agreement.
3. The on-lending term and grace period are equal to those specified in the relevant foreign loan agreement. The time of acknowledging debts is the time the foreign lender debits against Vietnam.
4. No loan security is required and no on-lending charge shall be collected.
Chapter II
APPRAISAL OF LOCAL BUDGETS’ DEBT REPAYMENT CAPACITY
Article 7. Appraising agency
1. The Ministry of Finance shall appraise local budgets’ debt repayment capacity.
2. The appraisal result shall be used as the basis for negotiation of ODA and concessional loans with donors. In case a provincial-level People’s Committee is unable to repay debts, the Ministry of Finance shall report to the Prime Minister for consideration and decision on mobilization of foreign loans.
Article 8. Appraisal process
1. When a provincial-level People’s Committee proposes to approve investment policy for an ODA- or a concessional loan-funded project under current regulations, it shall send a dossier prescribed in Article 9 of this Decree to the Ministry of Finance for appraisal of the local budget’s debt repayment capacity.
For a program or project which is proposed by a central agency and involves two or more provinces, these localities shall send a set of dossier prescribed in Article 9 of this Decree to the program- or project-proposing agency for forwarding to the Ministry of Finance.
2. Within 15 working days after receiving a complete and valid dossier, the Ministry of Finance shall appraise the local budget’s debt repayment capacity against the conditions for provincial-level People’s Committees to borrow loans under the on-lending mechanism prescribed in Clauses 3, 4 and 5, Article 4 of this Decree, and concurrently give opinions on the proposal for approval of the investment policy for a project. The Ministry of Finance shall notify the appraisal result to the Ministry of Planning and Investment for the latter to summarize and report to the Prime Minister for consideration and decision on the project’s investment policy and on-lending provision to the provincial-level People’s Committee. The Finance Ministry’s opinions shall be concurrently sent to the provincial-level People’s Committee.
3. Pursuant to the Prime Minister’s decision approving the use of ODA or concessional loans for the project under the on-lending mechanism, the provincial-level People’s Committee shall complete the prescribed investment procedures.
4. In case the funds borrowed from ODA or concessional loans exceed the level permitted by competent authorities or there is any change in the satisfaction of the on-lending conditions, a provincial-level People’s Committee shall send a dossier to the Ministry of Finance for re-appraisal no later than 30 days prior to the negotiation of loans with foreign parties.
Within 15 working days after receiving a complete and valid dossier, the Ministry of Finance shall re-appraise the dossier.
a/ In case the re-appraisal concludes that the provincial-level People’s Committee satisfies the on-lending conditions, for a foreign loan to be negotiated in the name of the State and be proposed to the Government for reporting to the President for opinion and authorization of negotiation, the Ministry of Finance shall report it to the Government or send its opinion to the State Bank of Vietnam (for loans proposed by the State Bank of Vietnam for negotiation) for summarization and reporting to the Government for consideration and guidance on negotiation policy. The Finance Ministry’s opinions shall be concurrently sent to the concerned provincial-level People’s Committee and the Ministry of Planning and Investment;
b/ In case the re-appraisal concludes that the provincial-level People’s Committee satisfies the on-lending conditions, for a foreign loan to be negotiated by the Ministry of Finance in the name of the Government, the Ministry of Finance shall assume the prime responsibility for, and coordinate with related agencies in, negotiating with foreign lenders, report to the Prime Minister for consideration and decision on the conclusion of the loan agreement and the on-lending to the provincial-level People’s Committee;
c/ In case the re-appraisal concludes that the provincial-level People’s Committee does not satisfy the conditions for borrowing additional loans under the on-lending mechanism or other on-lending conditions prescribed in Article 4 of this Decree, the Ministry of Finance shall report it to the Prime Minister for consideration and decision.
5. Within 5 working days after receiving an incomplete dossier, the Ministry of Finance shall make a written request for supplementation the dossier. The provincial-level People’s Committee shall supplement the dossier within 7 days after receiving the Ministry of Finance’s notice.
Article 9. Appraisal dossiers
1. A dossier for appraisal of the local budget’s debt repayment capacity must comprise:
a/ The written permission of the competent provincial-level agency to raise funds for investment or contribute funds to a public-private partnership project according to the plan on borrowing of the Government’s foreign loans and debt repayment sources (copy);
b/ The written proposal of the provincial-level People’s Committee for approval of investment policy or contribution of funds to a public-private partnership project with ODA or concessional loans (copy), covering the on-lent loan use plan;
c/ A report on the local borrowing and debt repayment situation at the time of proposal for borrowing, specifying all loans already borrowed and their outstanding debts and lenders; a report on the previous year’s outstanding loans of the local budget and the current year’s estimated outstanding loans and the ratio of repayable on-lent loans to the local budget revenues as assigned in the last three years (original);
d/ The annual local budget estimate approved by competent authorities (copy); a debt repayment plan and detailed explanations about the debt repayment plan and sources, including funds (if any) to be recovered from the investment projects, funds allocated from the local budget and other lawful sources approved by competent authorities (original);
dd/ Other relevant documents proving the province’s debt repayment capacity (if any).
2. Based on the Prime Minister’s decision approving the policy on use of ODA or concessional loans under the on-lending mechanism for projects, before the negotiation of foreign loans, the provincial-level People’s Committee shall complete investment procedures and send the project’s on-lending dossier to the Ministry of Finance.
Chapter III
ON-LENDING AND MANAGEMENT OF LOANS
Article 10. Conclusion of on-lending agreements
After concluding the foreign loan agreement, based on the Prime Minister’s decision on on-lending of ODA or concessional loans to the provincial-level People’s Committee, the Ministry of Finance shall sign an on-lending agreement with the provincial-level People’s Committee under the conditions prescribed in this Decree.
Article 11. Debt repayment responsibility
1. The provincial-level People’s Committee shall allocate funds from the local budget and/or other lawful sources in accordance with law to fully repay debts (principal, interest and charges) on schedule arising from on-lent ODA or concessional loans of the Government.
2. All on-lent loan repayment liabilities shall be fully calculated upon the estimation of annual budgets and formulation of medium-term financial plans of local budgets.
3. The repayment of on-lent ODA or concessional loans shall be guaranteed by provincial-level People’s Committees prior to payment of their other debts.
Article 12. Handling of risks
1. If failing to repay debts on schedule, a provincial-level People’s Committee shall pay the late payment interest under Clause 2, Article 6 of this Decree.
2. In case an on-lent loan of a provincial-level People’s Committee is overdue for more than 180 days, the locality may not borrow under the on-lending mechanism ODA and concessional loans for other projects.
3. In case a provincial-level People’s Committee further faces difficulties in paying its debts, the Ministry of Finance shall report it to the Prime Minister for handling on a case-by-case basis in accordance with law.
Article 13. Reporting
1. Quarterly, provincial-level People’s Committees shall send to the Ministry of Finance an evaluation report on the use of on-lent loans and a plan on repayment of on-lent loans in the subsequent quarter.
2. Annually, no later than 60 days after the end of the preceding fiscal year, provincial-level People’s Committees shall send to the Ministry of Finance a report on the use and repayment of on-lent ODA and concessional loans, stating the outstanding loans at the beginning of the period (opening balance), withdrawn loan amount, debt repayment amount in the period, outstanding loans at the end of the period (closing balance) and overdue debt (if any) in the borrowing currency and Vietnam dong, detailed for each on-lent loan.
Article 14. Local units specialized in on-lent loan management
Within its existing apparatus and payroll, a provincial-level People’s Committee shall organize a specialized unit under the provincial level Department of Finance to formulate reports on local debt repayment capacity and assist project owners in formulating financial plans of projects to be funded with on-lent loans; monitor and evaluate the province’s on-lent loan management process, develop a database on the province’s borrowing situation to ensure on-lent loans appropriate to loan limits, and monitor and formulate a plan to repay on-lent loans when they become due.
Chapter IV
RESPONSIBILITIES OF RELATED AGENCIES TO MANAGE ON-LENDING TO PROVINCIAL-LEVEL PEOPLE’S COMMITTEES
Article 15. Responsibilities of the Ministry of Finance
1. To assume the prime responsibility for, and coordinate with the Ministry of Planning and Investment and related agencies in, submitting to the Prime Minister for approval the domestic financial mechanism for programs and projects funded with ODA and concessional loans borrowed by provincial-level People’s Committees under the Law on Public Debt Management and this Decree.
2. To appraise loans of ODA and concessional loans on-lent to provincial-level People’s Committees under Article 7, 8 and 9 of this Decree, sign on-lending agreements, supervise provinces in repaying on-lent loans, develop a database on the borrowing situation of provincial-level People’s Committees, and monitor the recovery of on-lent loans.
3. To apply state budget accounting to ODA and concessional loans on-lent to provincial-level People’s Committees in accordance with law.
4. To assume the prime responsibility for, and coordinate with related agencies in, periodically (annually) and irregularly reporting to the Government on the borrowing and debt repayment situation of provincial-level People’s Committees.
Article 16. Responsibilities of a provincial-level People’s Committee
1. A provincial-level People’s Committee eligible for borrowing the Government’s ODA and concessional loans under the on-lending mechanism shall propose the Ministry of Finance to appraise the province’s conditions for borrowing and its debt repayment capacity, conclude an on-lending agreement with the Ministry of Finance, and manage and use on-lent loans effectively and for proper purposes in conformity with the approved plan and project’s contents.
2. Within its existing apparatus and payroll, to organize a specialized unit under the provincial-level Department of Finance to monitor and manage local budget debts, including loans borrowed from the central budget.
3. To monitor and evaluate the implementation of projects funded with on-lent loans and formulate and send quarterly and annual reports to the Ministry of Finance and concurrently to the Ministry of Planning and Investment under Article 13 of this Decree and report on the borrowing situation of the provincial-level People’s Committee.
4. To arrange annual local budget funds and other lawful sources for fully repaying debts on schedule and concurrently prevent risks of debts of the provincial-level People’s Committee.
Article 17. Responsibilities of central agencies managing umbrella projects
1. The agency proposing an umbrella program or project shall gather sets of dossiers from participating localities referred in Article 9 of this Decree and send them to the Ministry of Finance for appraisal of the localities’ debt repayment capacity.
2. In the course of implementation of an umbrella program or project, the managing agency shall coordinate with the Ministry of Finance in monitoring and urging localities in implementing commitments in the on-lending agreement signed with the Ministry of Finance, including paying debts, and applying relevant measures in accordance with law and this Decree in case a locality fails to fully pay its debts on schedule.
Chapter V
IMPLEMENTATION PROVISIONS
Article 18. Effect
1. This Decree takes effect on June 15, 2017.
2. On the effective date of this Decree, to annul Clause 3, Article 4; Clause 3, Article 7; Point b, Clause 1, Article 11; Point a, Clause 2, Article 12 and Clause 5, Article 19 of the Government’s Decree No. 78/2010/ND-CP of July 14, 2010, on on-lending of the Government’s foreign loans; to annul Clause 2, Article 8 of the Government’s Decree No. 16/2016/ND-CP of March 16, 2016, on management and use of official development assistance and concessional loans of foreign donors.
3. Projects using ODA and concessional loans under a financial mechanism decided by competent authorities before the effective date of this Decree may be further implemented according to the decided financial mechanism.
Article 19. Organization of implementation
1. The Minister of Finance shall guide the implementation of this Decree.
2. Ministers, heads of ministerial-level agencies and government-attached agencies, chairpersons of provincial-level People’s Committees, heads of agencies, organizations and persons involved in the management of on-lending of the Government’s ODA and concessional loans to provincial-level People’s Committees shall implement this Decree./.