Vietnam says aid pledges decrease to $7.9 bln

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Vietnam said it received US$7.9 billion in pledges of grants and low-interest loans, a decline from the previous year's figure that may fan concern the nation risks running short on foreign inflows.

The pledges were made at the meeting of the Consultative Group on Vietnam, Minister of Planning and Investment Vo Hong Phuc said at the event in Hanoi Wednesday. The group includes the World Bank and Japan and meets annually to help Vietnam's development, offering $8.06 billion last year.

The country's foreign reserves were at a "low" level at the end of September, covering 1.8 months of imports, the International Monetary Fund said Tuesday. The central bank devalued the dong in August to curb the trade deficit amid concern the Southeast Asian nation may run short on capital needed to fund the gap.

"Their foreign-exchange reserves are lower than they once were so the need for external financing becomes more important," said Robert Prior-Wandesforde, a Singapore-based economist at Credit Suisse Group AG.

The currency's official exchange rate was 19,490 as of 1:18 p.m. in Hanoi, compared with 19,099 before the August devaluation. On the so-called black market, the dong traded as weak as 21,160 as of 10:15 a.m. in Ho Chi Minh City, according to a telephone information service run by the state-owned Vietnam Posts & Telecommunication.

Global crisis

Phuc said the comparison of the latest pledge with last year's figure is affected by the fact that about $1 billion of the assistance offered in 2009 was to overcome the consequences of the global economic crisis.

The pledges must be turned into signed commitments for specific projects. Actual disbursements are expected to total $3.5 billion in 2010, with $3.2 billion in loans and the rest in grants, the government said in a report issued at the conference.

The World Bank will be the top disburser this year, followed by the Japanese International Cooperation Agency and the Asian Development Bank, the report showed. Transportation projects received the most funds, followed by energy and agriculture projects.

Aid providers are likely to reduce assistance gradually between 2011 and 2015, according to the report, as the poverty rate is set to fall below 10 percent this year from more than half the population two decades ago. Some loans will probably also become "less concessional," the government said.

Changing aid

"The form of the aid is changing," Michael Michalak, the US ambassador to Vietnam, said in an interview at the conference. The nation will "have to pay more for their money, but it's still going to be cheaper than what they could get at 100 percent market rates."

Vietnam's Prime Minister Nguyen Tan Dung has asked the country's authorities to strengthen efforts to keep prices and the exchange rate stable. Consumer-price growth reached a 20-month high of 11.09 percent last month, while August's devaluation was the third since November last year.

The Consultative Group on Vietnam has met annually since 1993 to help the nation's transition to a market-based economy. The government predicts the economy will expand up to 7.5 percent next year, accelerating from 6.7 percent in 2010.

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