HANOI, June 6, 2003 -- The World Bank's Country Director for Vietnam, Mr. Klaus Rohland, and the State Bank of Vietnam's Governor, H.E. Le Duc Thuy, today signed an agreement for a credit of US$54 million for a Public Financial Management Reform Project. The signing comes less than two weeks after the credit was approved by the World Bank's board, an important sign that the joint efforts made by the Government of Vietnam and the donor community to speed up implementation of ODA, and thereby making more resources available to Vietnam, are starting to bear fruit. A grant agreement for a further US$10 million was also signed, financed by the UK Department for International Development (DFID). Ms Jane Rintoul, DFID Vietnam, attended the signing ceremony, held at the State Bank of Vietnam headquarters in Hanoi.

The project will finance an integrated package of assistance to strengthen budget planning, execution, reporting and accountability. This will include technical assistance, capacity building and investment to strengthen and integrate core treasury and budget management information systems; to strengthen the links between budget management and the developmental goals set out in the Government's Comprehensive Poverty Reduction and Growth Strategy within a medium-term framework; and to improve the management of public debt and other fiscal risks.

It is hoped that the benefits of the project will include the following:

Strengthened fiscal discipline and risk management:  The new and integrated Treasury and Budget Management Information System, along with the establishment of a sound Medium-Term Fiscal Framework, will support better planning, monitoring and control of total budget spending and borrowing. This will help avoid macro-economic instability and the unnecessary borrowing costs associated with unplanned deficits. Careful recording of public debt liabilities and integrated management of such fiscal risks will help both minimize borrowing costs and avoid unnecessary risk exposure.

Budget allocations that support poverty reduction and growth:  The new Treasury and Budget Management Information System and the Medium-Term Fiscal Framework, combined with sector- and province-level Medium-Term Expenditure Frameworks, will result in better planning, monitoring and control of spending allocations between sectors and institutions. Better information and improved planning processes will result in a stronger focus on pro-poor, pro-growth public expenditure and faster progress towards the Vietnam Development Goals set out in the Government's Comprehensive Poverty Reduction and Growth Strategy. Better information will allow wider public scrutiny and debate about the appropriateness of budget allocation decisions and about the quality of budget execution, with consequent improvements in efficiency and effectiveness.

Improved efficiency and effectiveness of public services, thus reducing waste and checking corruption:  Better budget planning, monitoring and control will enable greater operational efficiency and effectiveness in the public services funded from the budget. Sector- and province-level Medium-Term Expenditure Frameworks will enable public service providers to plan ahead with more certainty and with more realistic expectations about the resources likely to be available to them. The transparency and auditability of the new Treasury and Budget Management Information System will help reduce waste and check incidences of corruption. Better cash management will be supported through more timely and accurate recording of cash transactions and balances and through integration of Treasury accounts.

 The project will be implemented by the Ministry of Finance, with close involvement of other agencies, over a period of approximately five years. A Project Management Unit will be created inside Ministry of Finance and will be headed by a full-time Director-level official. The project will build on recent analytical work supported by the World Bank and DFID, including the joint Government-donor Public Expenditure Review published in 2000 and the Country Financial Accountability Assessment published in 2001.