Monetary policy shortcomings

The Government said 2013’s fiscal and credit policy adjustments accorded with macroeconomic realities and helped businesses through difficulties

Banks’ interest rates dropped sharply in 2013. Conversely, total payment rapidly increased (above 16%). Credit growth resulted in better services, a lower bad debt ratio, steady foreign exchange rates, and high foreign currency reverses.

Minister of Planning and Investment Bui Quang Vinh said the interest rate strategy controlled inflation, relieved some of the pressures burdening businesses, and improved credit solution efficacy. 

The Government focused its efforts on the priorities of export production, agriculture, support industry, credit prevention funds, and bad debt settlement.

Minister Vinh explained credit growth in the first half of 2013 undercut set targets because of weak capital mobilisation.

Transport Minister Dinh La Thang said yearly credit growth was estimated at 10%, with much of the growth occurring as 2013 drew to a close. The strong flows of capital so late in the year might cause problems for investment disbursement.

Settling bad debts

The Prime Minister has asked for 2014 monetary policy to stay flexible and effective. The State Bank of Vietnam (SBV) should actively deploy its available tools to keep a check on inflation and ensure macroeconomic stability, and credit organisation liquidity.

The Government leader stressed the need for responsive adjustments of interest rates and foreign exchange rates that protect the value of the Vietnam Dong (VND), increase the State’s foreign currency reserves, and improve Vietnam’s international payment balance.

He urged relevant ministries and agencies to carefully manage the local foreign exchange and gold market. The State must monopolise gold import-export activity to control the domestic gold market.

The SBV should provide better credit services, resolve bad debts, establish risk prevention funds, advance debt restructuring, and expand oversight on credit organisation operations, Dung said.

Economists praised the Vietnam Asset Management Company’s (VAMC) early results while acknowledging shortcomings in approaches to lingering bad debts that restricted credit growth in the first months of 2013.

SBV Governor Nguyen Van Binh affirmed the State budget was not used to purchase bad debts. The VAMC offered better conditions for businesses to have easier access to new capital loans from credit organisations. 

The VAMC purchased VND30–35 trillion worth of bad debts in 2013, a figure expected to grow to VND100–150 trillion during 2014.

Binh believes the bad debts will be restructured ahead of introducing a debt purchasing market for all local and foreign investors.

According to the SBV Governor, many investors have expressed an interest in buying local businesses’ debts.