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Taming prices: Economists show the way
With probable hikes in electricity and fuel prices looming over the economy and threatening to have an adverse impact on people’s lives and on industry, Tuoi Tre spoke to economists to find out what the government should do to keep inflation under control.
The inflation last year was mainly caused by the liquidity in the economy caused by factors like high public spending and the stimulus package introduced a year earlier, Dr. Tran Du Lich, a member of the National Financial and Monetary Supervisory Commission, said.
This year it will be an effect of the rising costs, he said, warning if the government expects 7-8 percent growth, its financial and monetary policies will not work to keep down prices given those rising costs.
If it cannot drag down the inflation rate, lowering interest rates to reduce costs will be out of the question, he said.
A hike in the prices of such essential goods like gasoline, oil, and coal is unavoidable, he admitted, but the price increases should be effected in a regulated manner to cushion the shock.
Hoang Xuan Tho, Former Director of the Ministry of Industry and Trade’s Domestic Market Department, said the government should not allow price hikes that are not justified.
But he also said it is not advisable to continue subsidizing loans given to businesses for stabilizing prices of essential goods.
Trinh Huy Quach, Vice Chairman of the National Assembly’s Finance and Budget Commission, said the government should improve the efficiency of public investment to tame inflation and stabilize the economy.
Dr. Tran Hoang Ngan, a member of the National Financial and Monetary Supervisory Commission, said there is an expectation among the public that the prices of certain essential goods will continue to rise.
To combat that, authorities should clearly spell out their price adjustment plans, Ngan suggested.
Regulatory bodies should crack down on banks that breach exchange rate caps, he urged.
The central bank should provide more funds to banks to bring down lending interest rates, but banks should keep deposit interest rates high to mop up liquidity, he said.
He revealed that the government is working on a proposal to regulate forex rates with a focus on accumulation of foreign currency reserves and stop dollarization.
Dr. Nguyen Minh Phong of the Hanoi Institute for Socio – Economic Development Studies said the government should strengthen the social welfare system and launch more campaigns to stabilize food prices.
It should also be careful when hiking the prices of essential goods to avoid a shock to the market, he added.
Economist Pham Chi Lan said the government should keep a close eye the prices of such items as electricity, coal, gasoline, and oil.
Any price hike should be preceded by an official announcement, she added.
Nguyen Anh Tuan of the Ministry of Finance assured that the Department of Price Management will closely monitor prices and take action in case of unjustified hikes.
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