The ADB's Board of Directors today approved a five-year loan from its Countercyclical Support Facility (CSF) to provide budgetary support for Viet Nam to finance critical public expenditure programs in 2009 and 2010 in order to counter the adverse impacts of the global economic downturn.

Viet Nam has been severely affected by the global economic downturn brought about by the slump in foreign direct investment, exports, and remittances. Economic growth is projected between 4% and 5% in 2009, a marked slowdown from an average of 7.6% in the past 4 years. Economic growth below 5% could lead to higher unemployment and under-employment among the young labor force.

'The loan will allow the Government to meet its financing needs and support economic growth in a fiscally responsible way during a challenging period for the global economy. The Government will be better able to protect its social spending and poverty alleviation programs and objectives, and continue with its longer-term development objectives in 2009,' said Arjun Thapan, Director General of ADB's Southeast Asia Department.

Viet Nam has announced a set of temporary stimulus measures that it would advance infrastructure projects to generate jobs; cut tax and defer tax payments to support business and boost domestic consumption; provide credit guarantees and other measures to keep the credit flowing; and increase its budget for social welfare to assist the poor and vulnerable groups.

The crisis has affected the government's access to financial markets for budget financing. It has issued only a limited amount of domestic bonds since early 2009, as bond yields remain significantly higher than the ceilings set by the government.

The CSF, established in June 2009, supports ADB's developing member countries (DMC) needing to increase fiscal spending to counter the global economic crisis. To be eligible to access the CSF, DMCs must be adversely affected by the global economic crisis, demonstrate sound macroeconomic policies, and have a countercyclical program in place.

ADB has approved CSF loans to the Philippines and Kazakhstan. The CSF loan has a five-year repayment term, with a three-year grace period, and will cost around 200 basis points over ADB's financing cost, pricing that reflects spreads prior to the onset of the global economic crisis.#