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National advisory council for monetary policies to be dissolved?
The National Advisory Council for Monetary Policies is facing dissolution after 10 years of existence. The dissolution of the council was projected by the State Bank of Vietnam, which is compiling a draft law on amending some provisions of the Law on the State Bank.
Article 4 of the current Law on the State Bank stipulates that the government establishes the national advisory council to advise the government about decisions related to monetary policies.
The council is chaired by a deputy prime minister, while the governor of the State Bank of Vietnam is the permanent member, and other members come from ministries and are some finance and banking experts.
According to the State Bank, it is unnecessary to stipulate the council in the law, while the setting up of the consultancy council should be established by individuals or relevant agencies when necessary.
According to Nguyen Tuyet Duong, Deputy Head of the Legal Department under the State Bank of Vietnam, in order to make it suitable to the jurisdiction of the central bank in implementing monetary policies (the new law on state bank is expected to give the state bank independence in implementing monetary policies, though the state bank will still be an organ at the ministerial level), it is necessary to give the state bank’s governor the power to set up committees and consultancy councils.
The committees and councils will act as advisors to the governor on issues related to the organisation and operation of the central bank.
Chief Representative of IMF in Vietnam, Benedict Bingham, has expressed his support for the stopping of the council for the monetary policies. He said that Vietnam needs to heighten the jurisdiction of the state bank in building inflation targets, implementing monetary policies and using necessary measures to obtain the targets. This means that the central bank needs to have an independent voice in implementing measures.
The two most important functions of a central bank are 1/ stabilising the value of the local currency (curbing inflation and stabilising exchange rates) and 2/ ensuring the safety of the banking system’s operation. In order to fulfill the tasks, central banks in other countries in the world set up council/committees which give consultancy to the governors on monetary policies.
Meanwhile, in Vietnam, the national advisory council is independent of the State Bank of Vietnam and belongs to the government. The model, according to Benedict Bingham, will reduce the independence of the central bank, and reduce the power of the central bank. Meanwhile, it is difficult to reach a consensus in building up policies to deal with changes in the national economy.
Meanwhile, members of the council have not said exactly whether they support the plan on dissolving the council.
Cao Sy Kiem, a member of the council, said that one of the most important tasks of the central bank is to fight high inflation. However, in the period of the high inflation (November 2007-September 2008), the role of the central bank was dim. Meanwhile, the role of the Ministry of Finance was bright, though fighting against inflation was not the main task of the ministry.
Tran Du Lich, Dr. of Economics, also a member of the council, said that the operation of the council has been going the way that several meetings are organised every year. Lich said that the members of the council should be experts in finance and banking. But in fact, there are members who do not have deep knowledge about the field.
Meanwhile, another member of the council, who asked to remain unnamed, said that he does not agree with the viewpoint that the advisory council should be put under the central bank as seen in other countries. He said that in the countries, central banks stay independent from the government and they only implement the targets ratified by the National Assembly.
Meanwhile, in Vietnam, the governor of the State Bank implements the tasks assigned by the prime minister and the prime minister make decisions on the monetary market development. Therefore, the Prime Minister still needs a consultancy council independent from the State Bank.
The expert went on to say that in order to give an answer to the question about whether there should be such a national advisory council, it is necessary to discuss the independency level of the State Bank first.
Duong Thu Huong, Secretary General of the Vietnam Banking Association, who was on the team of compiling the State Bank Ordinance and Law on the State Bank, also did not give an exact answer about whether she felt the advisory council should be dissolved. She only said that the central bank needs to be given more independence in making decisions related to the management of monetary policies.
vietnamnet, dtck
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