The loan is mentioned in the HCMC Budget Development Policy Support Program (DPO-2), which has just been approved by the municipal People’s Committee.
Days payable outstanding (DPO) is a form of WB support that helps borrowers “achieve sustainable results through the process of policy and institutional reforms.”
The loan is expected to help the city fund infrastructure constructions and improve its management capabilities.
As currently envisaged, the entire disbursement amount from the program will be transferred to the city budget and spent on development projects under the public investment plan for the 2016-2020 period that have transitioned for implementation to the next five years.
Some of projects expected to benefit from the program include: building new general hospitals in Thu Duc City and districts of Cu Chi and Hoc Mon; a drainage system on Vo Van Ngan Street in Thu Duc; renovation of the Dam Sen canal; construction of embankments and tidal sluice gates on Cau Sap canal in District 8; and improving the drainage system on Ly Chieu Hoang Street in District 6.
The DPO-2 program will have a duration of three years, from the date the agreement between HCMC and WB is signed. Its financial mechanism would have the municipal administration re-borrow the capital on terms contained in the Financing Agreement for the DPO-2 program between the Ministry of Finance and the World Bank. The city will make its own arrangements to repay the debt on time.
According to the municipal administration, Prime Minister Pham Minh Chinh has allocated more than VND42.2 trillion ($1.83 billion) from the state budget for the city this year. Of this, official development assistance (ODA) would be VND14.8 trillion and the city budget would disburse nearly VND27.4 trillion from its own budget.
Meanwhile, the demand for capital of agencies this year is more than VND47.8 trillion ($2 billion), leading to an imbalance in capital allocation and a shortfall of VND20.4 trillion.
It is in this context that the HCMC administration believes that disbursement of capital from the DPO-2 Program in 2021 will help the city balance its budget for investing in development.
In the precursor programme, DPO-1, the finance ministry disbursed to the city in April 2020 a sum of VND2.86 trillion (around $124 million) arranged for 153 projects. As of January this year, more than 96 percent of the funds had been disbursed.