The World Bank said on Tuesday it had approved its biggest-ever loan to Vietnam as it virtually endorsed the nation’s impending elevation to middle-income status.
The US$500 million loan was the first to the fast-growing country from the bank’s low-interest lending arm, the International Bank for Reconstruction and Development (IBRD), which provides credit mostly to middle-income nations.
Vietnam has set itself a target of embracing middle-income status next year.
Until now, World Bank support to Vietnam had come from the International Development Association (IDA), which provides interest free loans to the world’s poorest countries.
The newly approved loan is aimed at supporting a program of public investment reforms in Vietnam, the Washington-based bank said in a statement.
“This is a significant milestone for Vietnam, a country which will have moved from the category of highly indebted country to middle income status in less than seven years,” said World Bank vice president for the East Asia and Pacific region Jim Adams.
The World Bank declared Vietnam IBRD-eligible in late 2007 but the Vietnamese government has requested a gradual transition to borrowing from the bank on IBRD-only terms.
It will continue to access IDA funds indefinitely.
Over the last two years, Vietnam has experienced a succession of shocks starting with massive capital inflows in 2007, a surge in commodity prices last year and export declines as a result of the global economic crisis. Stimulus measures adopted late last year and supplemented early this year contributed to strong growth, projected to be 5.2 percent this year, the bank said. World Bank country director for Vietnam Victoria Kwakwa said the quality of Vietnam’s future growth would depend on reforms to beef up public investment processes.
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