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MOIT’s suggestions to help ease difficulties for businesses refused
The Ministry of Finance (MOF) has officially refuted the suggestions made by the Ministry of Industry and Trade (MOIT), on the issues relating to the credit policy to help ease the difficulties burdening enterprises.
MOF has sent a document to MOIT, expressing its disagreement to the suggestions made by MOIT, in an effort to help businesses escape from the current big difficulties.
Regarding the interest rate policy, MOIT suggested that MOF should propose the government to apply a policy allowing to gradually reduce the short term credit interest rates to reasonable levels, and offer preferential interest rates to the enterprises that make products for export and labor intensive enterprises.
MOIT believes that this would be a reasonable solution that can help boost exports now, when the export markets have been narrowed.
In reply, MOF said that the Law on State Bank stipulates that the monetary policies management is the function of the State Bank of Vietnam, and the management of the monetary policies falls within the competence of the State Bank of Vietnam which will take management over the lending to all businesses, not only the enterprises making products for export and labor intensive enterprises.
Also according to MOF, the export credit policy is clearly stipulated in the Decree No 151 dated December 20, 2006, under which some categories of products that listed as the subjects to the state’s export credit policy can borrow money at the preferential loans of 11.4 percent per annum for VND loans, and 6.6 percent per annum for foreign currency loans. The loans are disbursed by the Vietnam Development Bank.
MOIT has also suggested allowing the enterprises, which have earnings in foreign currencies, to borrow money in foreign currencies, which will allow the enterprises reduce the capital costs. At present, the VND dong lending interest rates are higher than the dollar interest rates, which make it more profitable to borrow in dollars.
On this issue, MOF believes that it is necessary to consider slashing the proportions of the loans in foreign currencies in the whole banking system in order to settle the dollarization in the national economy. The current dong lending interest rates are higher than the dollar interest rates, and this should be seen as a reasonable thing in the current circumstances. When banks lend in dollars, they do not face the exchange rate risks, while the dong interest rates fluctuate in accordance with the market performance.
“The current exchange rate is stable, but when designing the interest rate policy, it is necessary to anticipate the exchange rate risks in the long term,” the document of MOF reads.
In an effort to help develop key mechanical engineering projects, MOIT has proposed MOF to instruct the Vietnam Development Bank to allocated sufficient capital to the approved projects, and cut down the preferential interest rates applied to the projects to less than 10 percent.
At present, the interest rate of the loans disbursed by the bank to the key projects is considered overly high at 11.4 percent, which is believed unaffordable to mechanical engineering enterprises.
However, the suggestion has been rejected, since MOF believes that the current preferential interest rate of 11.4 percent applied to the projects is relatively low already, if compared with the average market interest rate of 19 percent. MOF believes that no need to ease the interest rates further, or this would create a type of “interest rate subsidy” which would distort the capital market.
Under the current regulations, the Vietnam Development Bank decides the credit limits to be provided to mechanical engineering projects. In all cases, the loans to be disbursed by the bank must not be higher than 85 percent of the total investment capital of the projects.
vietnamnet, TBKTVN
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