In the near future, the Government would focus its efforts on controlling inflation, stabilizing the macro economy and creating favorable conditions for a healthy and sustainable development of the securities market, Prime Minister Nguyen Tan Dung said on March 15.
Working with the State Bank of Vietnam (SBV), the Government leader praised the State Bank and concerned ministries and sectors for having seriously implemented the measures set forth in Official Letter No. 319/TTg-KTTH of March 3, 2008.
The Prime Minister asked the bank to handle the monetary policies in a flexible manner and closely follow monetary market developments and creditors’ operations so as to respond in time to emerging problems.
SBV should tighten inspection and regularly monitor commercial banks’ operations and the monetary market developments, said PM Dung.
The Prime Minister also asked SBV to continue buying foreign currencies of exporters.
He also agreed with the proposals that SBV would further purchase foreign currencies of foreign investors for buying securities and that the equitization of state enterprises should follow a specific roadmap.
“It’s not time now to raise an issue on a rise in prices of electricity and coal,” emphasized Dung.
On the same day, Dung had a working session with the State Securities Commission (SSC). He said the stock exchange is fledgling but very important for the national economy, thus pushing the Government to closely follow its developments so as to take timely solutions to any arising problems.
He also expressed strong belief on the market’s stable and sustainable growth.
In Document No. 319, Prime Minister Nguyen Tan Dung ordered ministries, sectors and localities to implement comprehensive measures to curb the nation’s high inflation while maintaining a high economic growth rate.
The document said that despite scores of measures to control inflation since the beginning of the year, the consumer price index kept increasing at a high rate of 6.02% in the first two months, posing a huge challenge for the nation in meeting the year’s economic growth and inflation targets.
International prices could continue to grow as well as and could strongly impact Vietnam’s inflation and socio-economic growth rate, according to the document.
Specifically, the Prime Minister asked relevant ministries and agencies to focus on improving the investment environment to raise enough capital for economic growth.
In the area of public investment, the Government leader ordered that projects with slow disbursement or problematic designs or plans with low investment potential should be reviewed for delay or cancellation.
The Prime Minister asked SBV to continue applying a tightened, yet active and flexible monetary policy.
The SBV should assist commercial banks with capital so as to guarantee their solvency. The Prime Minister requested SBV to review the increase in banks’ compulsory reserve rates and issue SBV’s compulsory bonds as decided, a measure to limit the amount of Vietnam dong in circulation.
However, these measures must be flexible and correspond to the new monetary situation and the capabilities of credit institutions, the Prime Minister said.
A monetary guaranteeing a positive and rational interest rate should also be applied, he said. Credit growth of domestic banks must not exceed 30 per cent in 2008, but the capital demand for economic growth should be met and agricultural development encouraged. Credit operations should be controlled and improved to meet international standards
Although the document ordered a tightened monetary policy, it asked SBV to continue buying foreign currencies from investors.
Government bonds in Vietnam dong and foreign currencies will be issued in the country to restrict the situation of dolarization in the economy, attract idle money, reduce inflation pressure and increase national reserves or offshore investments. Under the current conditions, government bonds will not be temporarily issued abroad.
The exchange rate between Vietnam dong and U.S. dollar in particular and other foreign currencies in general must be managed on the market supply-demand balance within a fluctuation range of ± 2%.
The Prime Minister asked that fiscal, monetary and credit policies must guarantee healthy real estate development. Measures to prevent real estate speculation include credit control and tax policies and necessary administrative measures.
The Ministry of Construction and relevant agencies and localities must evaluate investment projects and increase the number of successful real estate ventures. Local commercial banks must only provide loans for healthy projects and not speculators.
Urgent measures to stabilize and control the downtrend of stock market indexes are also listed in the document.
The Prime Minister asked responsible agencies to study the establishment of wholly foreign invested fund management companies in
In order to supply more commodities, no restrictions should be imposed on companies to be listed on the stock exchange and a schedule of equitization and IPO of state enterprises, particularly corporations and big enterprises, must be worked out.
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According to this notification, the Deputy Prime Minister asked the Ministry of Finance and SBV to manage financial and credit operations according to specific and clear standards and criteria, which must be publicized, promptly detect and strictly handle any violations. Ministries, industries and localities must closely coordinate in implementing macroeconomic management measures and create conditions for professional and business associations to make policy proposals to help the Government properly manage banking and financial operations.
The SBV was asked to clearly announce its assistance plan to ensure commercial banks’ solvency and work out specific measures to closely control borrowing interest rates and gradually reduce them to reasonable levels for investment promotion and production and business development.
The Ministry of Finance must direct the State Capital Investment Corporation (SCIC) to purchase securities on the stock exchange to help stabilize the market. The Minister of Finance, who is also the Chairman of the SCIC’s Management Board, would decide on the quantities and lists of securities, the buying time and methods.
Particularly, the notice said that the Deputy Prime Minister agreed on principle with the proposal to allow foreign investors to buy up to 40% of shares of unlisted public companies, except for a number of areas specified by the Government.
Jonathan Pincus, chief economist for the United Nations Development Fund in
The International Monetary Fund (IMF) appreciated the priority the Vietnamese Government has attached to maintaining macroeconomic stability, according to a statement by IMF senior resident representative Benedict Bingham. This statement said that the IMF approved of SBV’s decision to tighten monetary policy based on the rise in inflation and widening of the trade deficit. “A sustained period of tighter monetary conditions will likely be necessary to rein in high credit growth.” However, he said the IMF advocated adjustments in monetary policy primarily through controlled increases in interest rates.
“A more flexible exchange rate policy would help make monetary policy more effective in controlling inflation, and help ease the current disequilibrium in the foreign exchange market.” (VLLF).-