World Bank to lend $350 mln to Vietnam for budget

HANOI, Aug 7 - The World Bank said on Friday it will lend Vietnam $350 million to prop up the budget this year as part of a poverty reduction credit scheme and to help Hanoi cope with the economic slowdown.

The funds were more than double what the World Bank gave Vietnam under a similar scheme last year, a response "to the country's request for additional resources to combat the negative impacts of the global financial crisis" and to help fund its economic stimulus measures, the World Bank said in a statement.

"The World Bank is pleased to be able to support Vietnam's ongoing economic reforms while providing additional financing for the government's stimulus plan." Victoria Kwakwa, the World Bank's Country Director for Vietnam, said in the statement.

"We will be working closely with the government on the reforms needed, as well as the financing needs for the future to grasp the opportunities to rise out of the crisis, and are willing to expand the support if needed."

The $350 million budget injection comes in the form of a 40-year interest free loan, a World Bank spokesman said.

The Vietnamese government is facing a budget shortfall this year that some economists project to be 10 percent of gross domestic product or more, in part due to stimulus spending.

Hanoi has been able to raise only a fraction of the amount it had hoped through bond auctions, with investors holding out for higher yields and the state treasury unwilling to raise its yield ceiling.

The World Bank and the State Bank of Vietnam, the country's central bank, on Friday signed the credit agreement for the eighth Poverty Reduction Support Credit (PRSC), under which the $350 million were allocated.

Since 2001, the World Bank has provided $1.325 billion and mobilised $817 million from other donors for Vietnam for poverty reduction and economic development efforts under the PRSC scheme.

Last year, the World Bank gave $150 million, its data showed.