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Monetary policy contributes to macro-economic stability VNTimes


The State Bank of Vietnam (SBV)’s monetary policy management hascontributed significantly to macro-economic stability and inflationcontrol, said Cao Sy Kiem, Chairman of the Association of Small andMedium Enterprises.

Kiem made the remark at a recent pressconference hosted by the SBV on the issues related to enterprises’access to bank loans, lending interest and non-performing loans (NPLs)resolution.

He held that in the context of difficulties in theeconomy, the central bank has managed the monetary policy in a flexibleand prudent manner and achieved encouraging results such as lowerinterest rates, stable exchange rate, increasing official reserves, andstable credit performance.

In response to the Government’sdirections, especially Resolutions No.01 and No.02, the SBV has managedthe monetary policy effectively. As a result, in the first four monthsof 2013, lending interest rates have been continuously reduced by 2-4percentage points. Particularly, the lending rate for five prioritysectors has been cut down to 8 -10 percent and a number of enterpriseshave borrowed loans with interest rates of 7.5-8 percent. As a matter offact, the prevailing interest rate is now back to the level of the2005-2007 period.

According to economists, interest rate has notbeen seen as a dominant factor constraining enterprises to get accessto bank loans, but the main reason for that problem is the large amountof inventory goods due to the low purchasing power of customers.

“The main problem today is not the interest rates, but the capitalabsorption of the economy,” Kiem said. “In order to help enterprisessell out inventory goods, it is necessary to enhance the aggregatedemand and purchasing power of the economy.”

Dao Van Hung,Director of the Institute of Policy and Development of Ministry ofPlanning and Investment, said that the current interest rate isreasonable for economic recovery in Vietnam . However, he said, inorder to increase capital demand of enterprises, the key factor is toraise the aggregate demand of the economy.

Therefore, he calledfor coordinated efforts to synchronously implement various measures witha focus on the monetary and fiscal policies.

He also said thatthe steps of interest rate management conducted by the SBV areappropriate. The interest rate management should be based on targetinflation, and interest rate reduction can only be realised wheninflation rate falls.

The targeted inflation rate in 2013 isabout 6.5-7 percent and the current interest rates are proper, hencecontributing to both meeting businesses’ capital demand and protectingthe benefits of depositors, he said.

In his address, SBV DeputyGovernor Le Minh Hung said that on May 21, 2013, the Prime Ministersigned a decree on the establishment of the Vietnam Asset ManagementCompanies (VAMC).

Through the acquisition and resolution ofNPLs, he added, VAMC will contribute to reducing debt repaymentpressures and assisting businesses in solving temporary financialdifficulties.

According to Kiem, both enterprises and commercialbanks need to be proactive in solving difficulties, but not onlyrelying on the VAMC.

In order to thoroughly resolve NPLs, hesaid, businesses need to restructure themselves more appropriately, andconsolidate and strengthen their management and governance.-VNA

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