Hanoi (VNA)- The Ministry of Finance on March 1 announced that the maximum level ofGovernment guarantees for a programme or project has been reduced to 70 percentfrom 80 percent.

Theadjustment is one of the regulations stated in the Government’s Decree 04/2017/NĐ-CP,promulgated early this year to supersede Decree 15/2011/NĐ-CP, issued onFebruary 16, 2011.

Accordingto the new decree, from March 1, Government guarantees must not exceed 70percent of the total investment capital of a programme or project approved bythe National Assembly.

Forprojects whose total investment is at least 2.3 trillion VND (102 million USD)and are approved by the Prime Minister, the maximum proportion guaranteed bythe Government is 60 percent.

Hoang Hai,deputy director of the ministry’s Debt Management and External FinanceDepartment, said on March 1 that the new decree aims at tightening theprovision of Government guarantees and enhancing the management of public debt.

In thefuture, the Government plans to gradually reduce the level of its guarantees sothat more State resources will be provided to key projects and programmes. Forother projects, investors’ borrowing must seek guarantees from commercialbanks, Hai added.

Explainingthe reduction, Hai said that previously, it was essential for the Government tosupport enterprises because the Vietnamese economy was in the very early stageof development.

However,at present, Vietnam has become a middle-income country with ability to accesslending sources such as Official Development Assistance (ODA) and World Bank’sIDA (International Development Association) also being limited, thus perceptionof public debts also needs to be changed.

Enterprisesmust find ways themselves to resolve their financial difficulties, instead ofdepending on State support, Hai highlighted, adding that businesses are nowbeing encouraged to access lending sources from foreign commercial banks andfinancial institutes.

With thenew decision, the proportion of loans guaranteed by the Government in thecountry’s total public debt is expected to decrease over time.

Electricityof Vietnam and PetroVietnam are enterprises which are striving to get loansfrom foreign banks, Hai said.

Besidesadjustments on the level of Government guarantees, the document also includesamendments for determination of guarantee fees and procedures for assessingprojects and applying for guarantees, as well as supplement regulations relatedto managing loans guaranteed by the Government, collateral assets and riskmanagement.

Hai saidthe value of the collateral asset must be at least equal to 120 percent of thevalue of the original loan or the value of bond issuance secured by theGovernment.

Theminimum guarantee charge rate for each programme or project has also beenincreased from 1.5 percent per year to 2 percent of the secured outstandingloan, He said.

Inaddition, under the current regulations, corporate financial capacity is also afactor which will be taken into account when determining guarantee charges, he added.

The newdecree also supplements accountability of State management agencies involved inthe process of appraisal and approval of projects which are eligible forGovernment guarantees in case of a problem.-VNA