JOINT CIRCULAR No. 09/TC-NH ON THE MANAGEMENT AND USE OF LOANS BY INTERNATIONAL CREDIT INSTITUTIONS

JOINT CIRCULAR

On the management and use of loans from international credit organizations

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  Pursuant to Decree No. 58/CP dated August 30, 1993 of the Government on the management and use of foreign loans;

- Based on the regulations of international credit organizations (ICO), the World Bank (WB), the Asian Development Bank (ADB), the Oil Exporting Countries Fund (OPEC), the Kuwait Fund (KUWAIT), and the provisions agreed upon in loan agreements regarding the use of funds from these organizations;

To implement the use of loans under development credit agreements or loan agreements (referred to as loan agreements) that the State Bank has signed on behalf of the Government with ICOs, the Ministry of Finance and the State Bank hereby jointly stipulate as follows:

Article 1: On the general management mechanism

1.1 All government loans from ICOs must be centralized in the State Budget, the Ministry of Finance shall be responsible for managing and repaying the principal and interest.

1.2 For project development loans that are not capable of recovering capital, the Ministry of Finance will manage them and transfer funds through commercial banks to suitable projects according to the current disbursement mechanisms within the country and the signed loan agreement. For project loans that are capable of recovering capital, the Ministry of Finance will lend them back to enterprises through selected commercial banks.

Article 2: On loan accounts

Loan account: After the loan agreement becomes effective, ICOs will open a loan account for the Socialist Republic of Vietnam at those ICOs (referred to as the Loan Account). The Loan Account will be debited to directly pay for the purchase of materials, machinery, equipment (referred to as goods) or to hire construction and consultancy services abroad, or to transfer funds to a Special Account (for the case of WB) or Advance Account (for the case of ADB) as required by the borrower as stipulated in the loan agreement. The Loan Account will be debited once the Borrower uses the loan.

Article 3: On Special Accounts (WB) or Advance Accounts (ADB)

3.1 The State Bank's Trading Department will open a transit account named after the project for a WB loan to receive the advance amount lent by the WB. The amount withdrawn to this account will be simultaneously transferred in full to a Special Account named after the project owner opened at the designated bank as provided in Article 6.1 to settle project costs in domestic currency and small amounts in foreign currency according to the loan agreement.

3.2 Regarding Advance Accounts (ADB), the Trading Department will open an Advance Account named after each ADB loan project to receive the advance amount lent by the ADB. The project owner opens an account at the designated bank to receive money from the above advance account to settle project costs in domestic currency and small amounts in foreign currency according to the loan agreement.

Article 4: Provisions on the procedure for withdrawing funds from ICOs to make direct payments or to transfer into the accounts mentioned in Article 3 are as follows:

4.1 For direct payment settlements

Based on the plan approved by the Ministry of Finance as stipulated in Article 5.1, the project owner and the serving bank have the responsibility to prepare a request for fund withdrawal from the loan account accompanied by necessary documents and certificates, one set for the Ministry of Finance (Department of Foreign Finance) and one set for the State Bank (Trading Department). Within five working days from receiving the request for fund withdrawal, the Ministry of Finance must provide feedback. If the Ministry of Finance approves, the project owner will sign the request for fund withdrawal to send to the ICO. After withdrawing the funds, the project owner must immediately report to the Ministry of Finance.

4.2 Withdrawing funds from ICOs to transfer into the accounts mentioned in Article 3

Based on the plan approved by the Ministry of Finance as stipulated in Article 5.1, the project owner and the serving bank have the responsibility to prepare a request for fund withdrawal accompanied by necessary documents and certificates, one set sent to the Ministry of Finance (Department of Foreign Finance), one set sent to the State Bank (Trading Department). Within five working days, the Ministry of Finance will review, confirm, and notify the State Bank. Based on this confirmation from the Ministry of Finance, the State Bank will sign the request for fund withdrawal from the loan account to transfer into the appropriate account.

Article 5: Provisions on management and use of funds in special accounts, advance accounts, and project accounts

5.1 Annually, the project owner and borrowing enterprises (including banks) shall prepare plans for implementing the project and using funds for the year, broken down by quarter according to the project's progress and agreements stipulated in loan agreements to be submitted to the Ministry of Finance for approval before conducting tender procedures, issuing letters of credit, and requesting fund withdrawals. The plan must specify:

a. Borrowed funds from foreign commercial banks

+ Amounts for direct payments

+ Amounts withdrawn to special accounts and advance accounts;

   - Withdrawal of funds from the account to cover domestic expenses or purchases in Vietnamese currency.

   - Withdrawal of funds from the account to cover the purchase of equipment, materials, etc., in foreign currency.

b. Domestic counterpart funds

5.2 Based on the aforementioned plan, quarterly, the project owner must submit a request for fund withdrawal (accompanied by appropriate documentation in accordance with signed loan agreements with foreign commercial banks) to the Ministry of Finance for endorsement. The review and endorsement period shall not exceed five working days.

On the basis of the Ministry of Finance's endorsement, in cases involving ADB loans, the State Bank will process the transfer of funds from the provisional advance account to the project account for the project owner's use (or to a commercial bank if intended for onward lending).

In cases where the project owner uses Vietnamese currency, the service bank will convert foreign currency into Vietnamese currency for the project owner in accordance with foreign exchange management regulations.

In cases of onward lending enterprises, the selected commercial bank for onward lending must enter into a loan agreement with the Ministry of Finance, with specific conditions for onward lending detailed in each contract.

Article 6: Service Banks

6.1 The Ministry of Finance and the State Bank will jointly select commercial banks to serve projects with loans, after consulting relevant foreign commercial banks.

6.2 Service banks must comply with all regulations of the State Bank, the Ministry of Finance, and relevant foreign commercial banks.

Article 7: Audit and Accounting Regulations

7.1 Special accounts, advance accounts, and project accounts will be subject to periodic audits consistent with internal control systems within the banking system.

7.2 The Ministry of Finance, the State Bank, and relevant foreign commercial banks will agree on an auditing agency that meets the requirements of the foreign commercial banks to conduct independent audits in accordance with their regulations.

Annually, the selected auditing company will conduct a comprehensive audit of all accounts, ledgers, and related final reports concerning accounts opened for project implementation and confirm them to the foreign commercial banks in accordance with international practices and standards while reporting to the Ministry of Finance. The Ministry of Finance is responsible for inspecting and supervising the operation of projects.

Article 8: Guidance on Implementation

8.1 The State Bank is responsible for guiding relevant operations related to planning for fund withdrawals, fund management, reporting systems, settlement, etc., for project owners or onward lending banks.

Article 9: Effectiveness and Amendment of this Circular

This Circular takes effect from the date of signature. The Ministry of Finance and the State Bank may amend this Circular if necessary.