IMF urges Vietnam to tighten monetary policy

It said Vietnam was weathering the global financial crisis relatively well but would need to adjust policies to keep the economy on an even keel.

The IMF advised monetary operations to "rein in dong liquidity and through an accelerated phasing out of the current interest rate subsidy schemes."

In addition, the IMF said an adjustment in policy rates may be needed if credit expansion continues to accelerate.

"In this context, we would urge the State Bank of Vietnam to lift the cap on lending rates, which is hindering bank operations, as soon as possible," the IMF said.

It said Vietnam's current stimulus plan could potentially raise the government's financing requirement to 12.5 percent of GDP in 2009, which would be difficult to fund without adding pressure on the balance of payments.

The IMF recommended the government's financing requirement, including drawdown of deposits, be limited to 8.5 percent of GDP.

Vietnews, Reuters

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