Effective use of foreign aid for poverty alleviation requires optimally allocating aid among three components: promotion of economic growth,direct targeting of the poor and safety nets and transfers. This paper analyses the allocation of foreign aid to Viet Nam by examining the poverty situation in Viet Nam and drawing implications. The poverty situation and recent aid trends to Viet Nam suggest that there is an imbalance between aid that promotes economic growth and aid that directly targets the poor. The phenomenon is evident in both the sectoral aid disbursement and the disbursement by approach to poverty. Additionally, aid is notregionally directed in a manner conducive to poverty alleviation and is urban-biased.