Vietnam - Vietnam facing several challenges: IMF

The State Bank of Vietnam (SBV), the country’s Central Bank, needs to own a clearer authority and more independence in stabilizing prices, International Monetary Fund (IMF) recently recommended.

The recommendation were offered at the seminar themed “Policy challenges in the process of transforming to medium-income economy” held on March 14 in Hanoi, where IMF representatives pointed out some factors affecting to Vietnam’s inflation.

Accordingly, Vietnam is facing several challenges such as thin capital size of such a huge banking system under the state’s control.

Mrs Nombulelo Duma—Economist of IMF’s Department for Asia Pacific, Middle East and fiscal matters said that Vietnam’s inflation is seen as a challenge. The inflation was attributed to such factors as interest rate ceiling and administrative credit control. Macro-economic management, targets of monetary policies, transparency and forecast capacity of monetary policies along with the working of monetary policy delivery also are the attributes of increased inflation in Vietnam.

According to the IMF report, the inflation is in a close relationship with real interest rates but in a looser relation with credit. She also proposed, to address a part of inflation problems, the Central Bank should gradually erase administrative management methods in term of interest rates as well as credit allocation and growth.

Interest rate frame needs to be set up as a significant tool of monetary policies, she noted.

Vietnam’s inflation is staying at the highest level as compared with Asian developing economies, IMF reported. In particular, the inflation in Q3 of 2011 surged 20.3% due to the impacts of relaxing fiscal and monetary policies.

VietBiz24

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