HCM City proposes raising annual loan caps

21-May-2019 Intellasia | The Saigon Times | 6:00 AM Print This Post

Authorities of HCM City have written to the prime minister asking him to consider and present their proposal on raising annual loan caps to the National Assembly (NA) for approval.

The city suggested the NA stipulate the total permissible amount of loans and acceptable overspending for the city based on its demand for capital and capacity to pay debts, ensuring that total outstanding loans do not exceed 90 percent of the city’s collected budget.

The city’s ongoing projects are in need of over VND13.2 trillion in on-lending loans from foreign donors this year, but the loan cap on on-lending loans assigned by the central government to the city is a mere VND5.49 trillion.

As the total loans taken out in a year must not exceed the regulated cap, the city will have difficulty allocating loan caps to each investment project.

Also, if a project requires a sum of capital that exceeds the city’s available budget to speed up the disbursement process, the city will not disburse the capital.

For instance, due to the speedy disbursement process of the Metro Line No.1 project, the city had to spend from the municipal budget to pay contractors.

In early 2019, the city’s total outstanding loans stood at VND18.3 trillion, with loans for the issuance of bonds accounting for VND14 trillion and on-lending loans making up the remaining.

The city ensured the cap on outstanding loans does not exceed 90 percent of its collected budget, but it can only take out loans within the loan caps and overspending rates approved annually by the NA.

Meanwhile, the city has taken out on-lending loans for 13 projects with total outstanding loans exceeding VND4.3 trillion. Also, it is in negotiations with the World Bank to take loans worth an estimated VND5.1 trillion.

The city currently works with ministries and central State agencies on obtaining on-lending loans for the Metro Line No.1 and No.2 projects, with an on-lending percentage of 100 percent.



Category: Finance, Vietnam

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