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World Bank, Vietnam sign $500M loan to reform Vietnam's Public Investments

December 30, 2009

Hanoi, 30/12/2009 – The State Bank of Vietnam and the World Bank today signed the credit agreement for the WB’s biggest ever loan to Vietnam, also the first from its International Bank for Reconstruction and Development (IBRD).

The signing marks a step closer today to Vietnam’s goal of reaching middle-income status by 2010, as IBRD is the low-interest lending arm of the World Bank aimed at reducing poverty in middle income and creditworthy poorer countries. Until now, World Bank’s support to Vietnam has come from the International Development Association (IDA) which provides credits and grants to the world’s poorest countries.

The newly approved loan is a US$ 500 million development policy loan that supports a program of public investment reforms in Vietnam.

“Public investment remains a very important engine for Vietnam’s growth, accounting for more than 30 percent of total investment, and 12.6 percent of GDP,” said Victoria Kwakwa, the World Bank’s Country Director for Vietnam. “Public investment reform is a long-term process and critical for further development of Vietnam. Reform measures within the timeframe of the operations are important but several challenges remain, notably the SOE reform agenda. We encourage the Government to continue the reform and are pleased to provide timely support, both financially and technically.”

The main goal of the loan, the first of two single-tranche operations, is to support a series of policy measures that are expected to strengthen the public investment in Vietnam. Creating foundation for a fully functioning legal framework for the effective management of public investment, strengthening the project cycles, improving transparency, supervision and oversight, and facilitating PPP development are key objectives of the operations.

The reform program, which has been widely consulted with various development partners, covers several areas, including environmental screening of publicly funded infrastructure projects, environmental management, project preparation and appraisal, procurement, public financial management, the regulatory framework for private participation in infrastructure and monitoring and evaluation.


NOTE For editors

Key terms about the loan:

  • Amount: US$ 500 million USD
  • Grace Period: 10 years
  • Loan period: 25 years
  • Front-end Fee: 0.25% of the Loan amount.
  • Interest Rate: LIBOR (6 month) for the Loan Currency plus the Variable Spread (0.17%)
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