Again, the issue
of lowering interest rates has been recommended urgently by the leading
economic experts in a recent meeting between the Prime Minister and leaders of
several ministries and departments with experts and scientists.
And although lowering interest rates cannot be delayed, the route and
level of lowering interest rates must be carefully considered.
Lowering interest rates cannot be delayed as the "storm" of
bankruptcy of businesses is now covering all of the country with a dizzying
speed.
Recent report of the Vietnam Chamber of Commerce and Industry (VCCI)
shows, in 2011, the country had more than 79,000 businesses going bankrupt.
Particularly for less than first three months of 2012, the number of
enterprises suffering difficulties and being forced to dissolve or suspend
operations increased by 6% over the same period last year. Especially, the
number of enterprises that have completed procedures for dissolution increased
57% from the same period last year.
The dissolution and stagnancy situation of businesses has led to an
inevitable corollary of slower GDP (gross domestic product) growth in the first
quarter of 2012 with about 4%, the slowest growth level in many past years.
Thus, unless hardships of enterprises, especially difficulties in interest
rates are removed timely, it is likely that the list of dissolved enterprises
will be increasing more and more.
Further, the economy will be hard to reach the growth target of from
5.5 to 6% as planned and accompanied by a series of social problems will arise.
Economic specialists compared that thousands of businesses are being
"fired" due to lack of credit, but the government has not opened the
water valve yet. Without timely measures to resolve the problems, it is likely
that there will be more thousands of companies to go bankruptcy and millions of
workers to lose their jobs, negatively impacting on the socio-economic
situation.
In fact, there have been premises for cutting down interest rates when
bank liquidity improves and inflation fell sharply (in Jan-March 2012, the
inflation was only over 2.5%) and banks also agreed that they cannot lend
because of too high interest rates. Total outstanding loans of the banking
system by the end of February and early March 2012 decreased 2.51% compared to
the end of last year. If the high lending interest rate is extended, certainly
not only businesses but also banks will fall into difficulties.
Lowering interest rates is unable to delay. But how much does the
interest rate reduce? And when is a reasonable time for lowering the interest
rates. This is also a matter of special attention. The State Bank of Vietnam
(SBV)'s decision to lower the deposit interest rate ceiling by 1%, and
announcement to bring down the interest rate to 10% per year by the end of this
year showed the central bank has moved from passive to active. In fact, the
reduction of interest rates should not be carried out so suddenly, if not it
will cause the disorder in liquidity in some banks and potentially
unforeseeable risks to inflation and forex rate.
However, with the current health situation of businesses, it is
necessary to accelerate the schedule of reducing interest rate to 10% per year
right in the third quarter 2012 to facilitate help revive businesses in late
2012 or early in 2013. In this direction, with abundant credit source, the
central bank can fully offer refinance loans at reasonable interest rates for
commercial banks to re-lend businesses at the interest rates of around 10% /
year but does not need to lower the deposit interest rate cap as well as solve
the bank liquidity issue.
Of course, this special refinancing program should be done according to
the rules to ensure the money inflows in the right direction and right
purposes. In the long run, when inflation is brought to a stable level, the
central bank can regulate interest rates in Vietnam to be equivalent to the
level in the world, at least equivalent to the region to help enterprises
increase their competitiveness.
VietBiz24
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