Vietnam halts use of German Development Bank’s ODA for metro line No. 2 in Ho Chi Minh City

Vietnam’s Prime Minister Pham Minh Chinh has approved a decision to discontinue the use of non-refundable ODA and concessional loans from the German Development Bank (KfW) for metro line No. 2 project in Ho Chi Minh City as proposed by the municipal government.

In particular, Vietnam halts the use of all loan capital under loan and aid agreement No. 1 dated March 1, 2011, and loan and aid agreement No. 2 dated June 4, 2011, with a total value of 155 million euros (US$182 million) from KfW.

It also discontinues the use of 66.24 million euros ($77.8 million) in non-refundable ODA under agreement No. 2.

The prime minister assigned the Ho Chi Minh City People’s Committee to utilize the remaining non-refundable ODA under agreement No. 2 in accordance with regulations.

The city must take full responsibility before the prime minister, auditing and inspection agencies for the accuracy of reported data, proposals, and compliance with regulations.

The city is also responsible for allocating local budget funds to pay all commitment fees and related costs arising from the discontinuation of loan usage, as notified by KfW, until all necessary procedures with the bank are completed.

Ho Chi Minh City is required to coordinate promptly with the Ministry of Finance and relevant agencies to amend agreement No. 2 with KfW in line with legal provisions.

Additionally, the city and the Ministry of Finance must complete procedures to ensure full allocation of medium-term and annual public investment to ensure capital for the project.

Metro line No. 2, with a length of 11 kilometers, requires a total investment of VND47.89 trillion ($1.8 billion).

The capital structure includes VND10.4 trillion ($398.6 million) in counterpart funding and the remainder coming from ODA and concessional loans from international donors, including the Asian Development Bank, KfW, and the European Investment Bank.

During its implementation, the project encountered numerous challenges, leading to a schedule adjustment with completion now expected by 2030, instead of 2026.

Of five signed loan agreements, three from the Asian Development Bank and the European Investment Bank have expired.

The remaining two agreements with KfW require extensions to proceed.

Processing new loans from donors involves a different and complex procedure.

Amid these difficulties and the National Assembly’s issuance of special policies for developing urban rail networks, Ho Chi Minh City has agreed to use the state budget for metro line No. 2, instead of ODA loans.

On March 26, the city announced a plan to develop seven metro lines with a total length of 355 kilometers over the next ten years.

Six lines are scheduled to begin construction in 2027, while metro line No. 2 is set to start earlier, in December 2025.

The decision to stop using ODA funds marks a key turning point in completing the necessary procedures to deploy state budget funding for the project.

It also provides the basis for Ho Chi Minh City to select a new consulting firm, redesign the project, and conduct bidding to choose contractors, ensuring the project starts on schedule.

Thanh Ha - Duc Phu / Tuoi Tre News

(2025/07/08-18:32)