HANOI, May 23, 2003-- The World Bank yesterday approved a credit of US$54 million for the reform of the public financial management system in Vietnam. The Public Financial Management Reform project supports the goal of promoting good governance set out in the Government's Comprehensive Poverty Reduction and Growth Strategy through strengthening budget planning, execution, reporting and accountability.

"Vietnam has earned a reputation for fiscal prudence, with relatively small budget deficits and low debt, both domestic and foreign. The Government of Vietnam has made steady progress in maintaining effective mechanisms to prevent over spending and misappropriation of resources," said Mr. Klaus Rohland, World Bank Country Director for Vietnam. "However, there is an urgent need for further, accelerated reform to strengthen and integrate core treasury and budget management information system, to strengthen the link between budget management and the Government's development goals, and to improve the management of public debts and fiscal risks."

The Project will ensure that budget execution and reporting at each level of the Government is accurate, timely, relevant, transparent and in compliance with international standards. It will contribute to better planning of the State Budget and Public Investment Program and greater fiscal sustainability through improved and more integrated recording of external and domestic public and publicly guaranteed debt, improved capacity to monitor SOE liabilities and improved ability to assess associated fiscal risks.

The first (and largest) component of the Project will involve the implementation of an integrated Treasury and Budget Management Information System. The new system, including hardware, software, implementation services, training and change management, will replace the current fragmented and inefficient systems.

The second component of the Project will address the need for a strong central budget function through strengthening state budget and investment planning. This component will support the development of a Medium Term Fiscal Framework (MTFF) and of Medium Term Expenditure Frameworks (MTEFs) in four pilot sectors and four pilot provinces.

The third component of the Project will support the strengthening of the Government's ability to manage Vietnam's public debt and to begin monitoring fiscal risks that originate from liabilities of State-own Enterprises. Through appropriate learning activities, the Project will facilitate the strengthening of skills of officials within the Government so as to ensure it is able to conduct day-to-day debt management operations, and advise policy makers on the implications of alternative borrowing strategies.

The Project will be jointly financed by the World Bank and the UK Department for International Development (DFID) with DFID providing $10 million in grants.

"This important project shows how donors and the Government can work effectively in partnership. The combination of DFID grant funds and the World Bank loan is a more powerful combination then each of us working separately. We believe improvements in the quality of the financial information available as part of the state budget process will lead to greater opportunities for donors to make direct use of the GOVN budget to deliver development assistance. But even more importantly, it will strengthen the accountability of Government to its own citizens," said Mr. Alan Johnson, Director of DFID in Vietnam.

The Project will be implemented by the Ministry of Finance with close involvement of other agencies. A Project Management Unit will be created inside MOF and will be headed by a full-time Director-level official of the MOF.

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Click here for more information on the Public Financial Management Reform Project

For the Vietnamese translation of this press release, please contact Hoang Thanh Ha at e-mail hha@worlbank.org, tel (4) 9346600 fax (4) 9346597 or mobile phone 0903430193.