In its report to the National Assembly Chairman, the Economic Committee said the 4% interest rate subsidy package should be halted because it had fulfilled its mission.

The real estate market is getting warm.

The committee pointed out only 22 percent of business had access to the package, which actually promoted inequality.

Moreover, the package was seen as distorting monetary and foreign exchange markets. The reduction of 4 percent meant interest rates for Vietnam dong and US dollar were nearly equivalent so enterprises only wanted to borrow Vietnam dong to avoid exchange rate risks.

At the same time, exporters tended to keep foreign currencies instead of selling to banks while importers only wanted to borrow Vietnamese dong to buy foreign currencies.

It meant banks didn’t have enough foreign currencies to sell. The State Bank of Vietnam had to sell foreign currencies to stabilise the market - a reduction of $5 billion in foreign currency reserves.

As the current average deposit interest rates of 8-9 percent are higher than subsidised lending interest rates, some businesses borrowed with subsidised interest rates at one bank then deposited at another.

According to the NA’s Economic Committee, many enterprises earned higher profits from subsidised interest rate loans but output and production didn’t increase.

The committee had said subsidised interest rate loans may not be used for production and business but be invested in securities and real estate, especially by non-State enterprises, which accounted for 68.6 percent of the total outstanding debt balance.

It was pointed out that the real estate and stock markets warmed up following the implementation of the interest rate subsidy.

In this light, the NA’s Economic Committee suggested that in the current economic situation, the government should continue to try and stimulate the economy but needs to change its methods and targets.

The committee emphasised that the interest rate subsidy package had fulfilled its mission of saving businesses.

LN