|
Expenses for fighting inflation must be divided equally: CIEM
Nguyen Dinh Cung, Head of the Macroeconomic Policies Department under the Central Institute of Economic Management (CIEM), said that the state should keep fiscal and monetary policies in harmony. It should use fiscal policies as well instead of only relying on the monetary policy, especially interest rate policy, when trying to restrain inflation.
With the new basic interest rate of 14% per annum, the maximum lending interest rate will be over 20%. Do you think that businesses can afford such a high interest rate?
In principle, the basic interest rate of 14% still cannot bring positive real interest rates to depositors as the inflation rate is still higher than the profit depositors can get. Higher lending interest rates will force businesses to try to cut down expenditures and improve productivity. They will have to cancel projects that may be unprofitable with the current high interest rates.
Only the most effective production and business can exist and develop. A process of eliminating bad businesses will kick off with the new interest rate policy, and I think the process will be useful for the national economy. However, it would be a catastrophe if too many businesses were eliminated from the playing field.
I think that in the last time, the government has focused too much on the monetary policy to fight inflation, while other fiscal policies have not been applied. In other words, the task of fighting inflation has been burdening the monetary policy, especially the interest rate policy.
The government should pay appropriate attention to the implementation of other fiscal measures as well in the time to come. I do hope that the volume of public investment to be cut per request of the government will be big enough to have considerable impacts on the total demand of the national economy, which will help ease the pressure on inflation. If so, the interest rate policy will not have to bear the burden, too heavy compared to its capability, in the fight against inflation anymore.
Even when banks have profuse capital, private and joint stock banks still find it difficult to access bank loans. Meanwhile, banks now have to slow down credit growth. What do you think about businesses’ capability of accessing bank loans?
Expenses for fighting inflation must be divided equally: CIEM
The private economic sector is always inferior to the state owned economic sector in terms of bank loan accessibility. Private run businesses always get bank loans from joint stock banks, while joint stock banks have proven to be the biggest sufferers recently, with the state trying to tighten the monetary policy.
As such, due to the difficulties in accessing bank loans, the private economic sector now has to bear all the expenses for fighting inflation. Meanwhile, the state-owned economic sector has not suffered much as the investments of the sector have not been cut much. I mean the expenses for fighting inflation have not been divided equally. The state should use both the fiscal and monetary policy in balance in order to ease the pressure on the monetary policy. Only by doing so, can the state help ease difficulties for joint stock banks, thus helping reduce expenses for private businesses.
How do we apportion the expenses for fighting inflation, then?
Cutting state investments, reducing state budget funded investments. The investment capital is now lacking in society, and if we don’t cut the state’s investments, the capital lack burden will be only on the shoulders of private owned businesses.
How do you think the difficulties will influence non-state enterprises?
The growth rate of the private economic sector has been decreasing in the last three years. In 2007, the private sector just made up 31.6% of the total investments, while it made up 38% of total investments in previous years. The high inflation in the last two years has been dealing a blow to the private economic sector.
VNN
|
