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Inflation risks lower than thought: MPI
The $8bil for the demand stimulus packages will come from five sources, including government bonds. The risk of inflation returning is present, but this won’t happen before 2010, according to Deputy Minister of Planning and Investment Cao Viet Sinh.
At the investment forum in Hong Kong, Vietnamese Prime Minister Nguyen Tan Dung officially announced the demand stimulus package worth $8bil instead of $6bil as previously planned. Where will the $8bil come from?
The sum of money will come from five sources. First, government bonds. Besides the approved plan on issuing VND36tril worth of government bonds, the government will ask for permission from the National Assembly for the issuance of another VND20tril.
Second, there will be VND27tril from tax exemptions and reductions.
Third, the government bonds in 2008 which have been unused and will be transferred from 2008 (VND7,700bil).
Fourth, the state budget.
Fifth, the state will guarantee for businesses to borrow capital from other sources.
This means that a big sum of money will be put into circulation. Haven’t economists expressed concerns about inflation returning?
The risk exists, but high inflation won’t occur, at least in the immediate time. It may happen in 2010 only, or later.
In fact, inflation risks prove to be lower than previously. State management agencies still keep a close watch over the price index. The CPI will not increase sharply in April. It is likely that the inflation rate in 2009 will be 6%.
What is the government doing to prevent high inflation from returning?
It is necessary to keep close watch over the market and credit performance. You may know that in 2007, credit provided for the national economy increased by 2-3 times in comparison with the previous year, causing high inflation. Therefore, the government will need to keep a close watch over the credit market.
Credit grew by 5% in Q1, and we hope that no sharp increase will be seen in the coming quarters. We are targeting the credit growth rate of 30% this year, a level which is safe for 2010.
You have mentioned the providing of credit guarantees to businesses, thus helping them upgrade technologies. But what will we need to do to ensure that Vietnam will have modern technologies and it will not become a place which consumes waste technologies?
The Ministry of Science and Technology has criteria about technologies. I have to say that we should not think all Chinese technologies are old technologies.
Vietnam’s development level is still limited while the average income per capita of $1,000 per annum. It is very expensive to get the most modern technologies.
Signs all show that most Vietnamese businesses have no strength left, while they still have to bear heavy administrative procedures on their shoulders. What would you say about that?
Every year, the government repeats the need to ease administrative procedures. This job will also be continued this year
The Ministry of Industry and Trade is going to propose a mechanism on further decentralisation.
In the next session of the National Assembly, the government will submit to the National Assembly a law on amending some provisions of several other laws (construction law, bidding law, enterprise and investment laws). The law, once enacted, will help remove the overlapping provisions in related laws.
Pham Huyen
vietnamnet
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