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MANILA, PHILIPPINES - ADB has approved a US$15 million loan to help boost the Government of Viet Nam's efforts in reducing poverty.

The loan will form part of a $225 million assistance from the donor community that will support the Government of Viet Nam's ongoing poverty reduction program.

Viet Nam has been able to halve its poverty levels in about 10 years, with its poverty rate dropping from 58.1% in 1993 to 24.1% in 2004. Social indicators, such as school enrollment and infant mortality, as well as other human development indicators show steady improvement.

However, the rate of poverty reduction has slowed in recent years. While the country has experienced high economic growth, annual income per capita remains low at US$600 and Viet Nam is still categorized as a "least income" country.

"The Government has made impressive progress over the last decade in terms of achieving a high level of economic growth and reducing poverty," says Bradford Phillips, Country Director for ADB's Resident Mission in Viet Nam. "To maintain this trend, the Government must continue its program of effective policy reform."

ADB's loan falls under the Poverty Reduction Support Credit (PRSC) framework, which the donor community uses to provide financial support to the Government's Comprehensive Poverty Reduction and Growth Strategy for 2002-2006.

The loan will help to address the fourth annual PRSC's three key areas of reforms - supporting the transition to a market economy by improving the business environment, making development socially inclusive and environment friendly, and modernizing governance and the public administration system.

Over the past four years, the PRSC framework has expanded its focus from reforming state-owned banks and enterprises to a broader agenda covering a number of sectors and issues affecting poverty reduction and growth.

The policy measures supported by PRSC 4, such as the safety net for redundant workers of state-owned enterprises, expansion of the budget for the education sector, and creation of provincial health care funds for the poor, all entail a substantial additional burden on the budget and Viet Nam's external financing needs for 2005 is estimated at US$1.4 billion.

Aside from ADB, PRSC 4 is supported by concessional loans from the World Bank (US$100 million), Japan Bank for International Cooperation (US$22.8 million) and the French Development Agency (EUR10 million).

Grants will also be provided by Canada (Can$6 million), Denmark (US$10.8 million), European Commission (EUR8 million), Ireland (EUR1.5 million), Netherlands (EUR8 million), Spain (EUR2 million), and the United Kingdom (£20 million).

ADB's loan comes from its concessional Asian Development Fund and carries a 24-year term, including a grace period of 8 years. Interest rate is set at 1% per annum during the grace period, and 1.5% per annum thereafter.

The State Bank of Viet Nam is the executing agency for the program loan, which is due for completion in December 2006.

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