On 30 June 2023, the State Bank of Vietnam passed Circular 08/2023/TT-NHNN ("Circular") to prescribe eligibility requirements for taking foreign loans that are not guaranteed by the Government. The Circular, which came into force from 15 August 2023, introduces significant changes to borrowings by Vietnamese companies from overseas.
The Circular prescribes more restrictions on the purpose for which foreign loans can be taken:
- For short-term foreign loans, these can only be taken out to restructure the borrower’s foreign debt and for payment of short-term payables.
- For medium or long-term foreign loans, these can only be taken out to finance investment projects, business plans or other projects of the borrower, or to refinance existing foreign debt. However, unlike its predecessor, the Circular no longer permits borrowers to take out foreign loans to finance projects or business plans of the borrower's affiliates.
The Circular also now allows debts of foreign loans to be recorded in Vietnamese Dong (but disbursed and repaid in foreign currency). In such case, the foreign lender may record such a loan as a Vietnamese Dong loan.
