LookAtVietnam – The National Assembly’s Economic and Budget Committee reported that the interest subsidy mechanism was the optimal economic stimulus policy from the Government.

Following the inspection of the 206 branches of 45 commercial banks, new reports suggest that policy is working properly.

According to Deputy Governor of the State Bank of Viet Nam Nguyen Dong Tien, by late August, total lending had amounted to VND396.4 trillion (US$22 billion). The lending amount to non-State businesses account for nearly 67.6 per cent of total lending, State-owned enterprises account for 15.4 per cent with the remaining lending going to households and co-operatives.

Tien said that the total lending amount with interest subsidy was expected to be around VND600 trillion ($33.3 billion).

Following the inspection of the 206 branches of 45 commercial banks, new reports suggest that policy is working properly.

Speaking at the meeting, representatives suggested that the report should provide a deeper analysis on the effects that the interest subsidy have had on production and businesses activities.

Representatives remained concerned with the low rate of lending in rural sectors due to complicated procedures. They suggested that the Government should loosen its policies to increase opportunities for farmers.

According to Tien, problems might negatively affect macro-economic stabilisation and banking.

The interest subsidy had helped prevent further economic stagnation. However, it would still be unwise to maintain the policy for too long, said Tien.

He suggested that the Government should focus more efforts into administrative reforms and work to create a better business environment.

Currently, the high increase of total payments resulted from interest subsidy in tandem with the extended fiscal policies and loosened regulations on currency. These measures resulted in an excess of capital mobilisation, which created pressure that led to an upward trend in market interest. In addition, interest subsidy for short-term loans has highlighted the inequality for businesses.

Tien also said that the current 4 per cent interest subsidy was pretty high and might not encourage businesses.

Deputy head of the Economic and Budget Committee Tran Dinh Nha also shared his concern about the simultaneous application of subsidy policies, which might put pressure on banks and credit units.

At the afternoon session, participants discussed the auditing plan for next year.

Under the plan, the State Audit Office of Viet Nam will audit 34 cities and provinces, 15 ministries and industries and 10 social and political organisations. In addition to the six transitional projects of 2009, another 25 key construction projects on infrastructure, irrigation and electricity will also be audited.

VietNamNet/Viet Nam News