Under Decision 544/2017, the Prime Minister has approved the program for management of Government loans for the period 2016 – 2018. The Prime Minister is exercising his authority under the Law on Management of Public Debts 2009. Decision 544/2017 contains various limitations on the ability of Vietnamese companies to obtain foreign loans under this period. In particular,
- The amount for commercial loans borrowed by local enterprises and credit institutions not guaranteed by the Government is capped at around USD 5.5 billion per annum. Numerous foreign loans have to be registered with the State Bank of Vietnam and the State Bank of Vietnam shall only register foreign loans falling within the aforementioned cap.
- Regarding existing foreign loans which have been granted with Government guarantee and are being disbursed, the Government will apply measures to limit the annual net withdrawal to no more than USD 1 billion.
- Government guarantee shall not be granted to new foreign loan, except for priority program/project.
- The foreign exchange reserve must be at least equal to 200% of the short term foreign loans.
- It seems that the overspending of State budget has led to the demand of the Government to limit its potential paying obligation.
This post is contributed by Nguyen Hoang Duy, an associate at Venture North Law.