The consumer price index (CPI) has followed a downward trend over the last three months and this is a positive sign for maintaining a low rate of inflation and stabilizing the socio-economic situation and people’s living conditions.

However, it is no easy task to reduce the inflation rate if macro measures are not strictly implemented from now until the end of the year.

A Radio Voice of Vietnam (VOV) reporter interviewed Cao Sy Kiem, former Governor of the State Bank of Vietnam (SBV) on the issue.

VOV: What is your opinion on the CPI in recent months and the possibility of keeping inflation at 18 percent?

Mr Kiem: Thanks to the effective implementation of the government’s Resolution 11, there have been positive signs that the rate of inflation will likely to drop to one-digit figure.

However, there remain risks in controlling the CPI. Usually, Vietnam has to spend large amounts of money importing goods at the end of the year and this may lead to price hikes. In addition, it is difficult to maintain the banks’ interest rates and exchange rates as well.

The global food crisis caused by natural calamities can also be another factor in driving up food prices in the country.

In my view, if synchronous measures are implemented in finance, monetary management, trade deficit, and trade, we are able to keep inflation at 18 percent and reduce it to 9-10 percent in 2012.

VOV: Do you think the measures implemented by the government are effective enough to reduce inflation as expected?

Mr. Kiem: Monetary and financial policies, investment efficiency, and trade deficit can affect the rate of inflation. We have taken effective remedies for inflation control such as reducing interest rates, maintaining exchange rates, and increasing foreign currency reserves. However, in the long term, Vietnam should better manage the import surplus and public debts, increase the Incremental Capital-Output Ratio (ICOR) index, and decrease budget overspending.

VOV: What do you think about Vietnam’s management of public debts, which is said to affect the containment of inflation?

Mr Kiem: Vietnam’s public debts hover around 50-60 percent of its Gross Domestic Products (GDP). Although it is not an alarming figure compared to other countries, we should be aware that the rate of inflation remains high while the efficient use of capital is too low.

If we are unable to curb inflation and manage capital resources well, it will be difficult for us to pay the debts. Therefore, we should make the best use of capital in an effective way.

The government’s recent measures to stabilize the macro-economy and ensure social welfare have helped controlling public debts. However, in order to avoid risks, Vietnam should reallocate its capital resources to specific areas and sectors and take more drastic measures to stimulate economic growth.

VOV: Thank you very much!