At the ongoing National Assembly session on May 21, many deputies said that it is essential to use basic interest rates as a tool to ensure the State’s role in managing the market.

At the ongoing 7th session of the 12th National Assembly (NA) on May 21 many deputies said that it is essential to use basic interest rates as a tool to ensure the State’s role in managing the market and implementing relevant legal regulations.

Under the chairmanship of NA Deputy Chairman Nguyen Duc Kien, the second day of the 7th session heard a report by Ha Van Hien, head of the NA Commission for Economic Affairs, regarding an amendment to the draft law on the State Bank of Vietnam (revised).

The draft law on the State Bank of Vietnam (SBV) discussed at the previous session includes 7 chapters and 66 articles regulating the organisation and operation of the SBV. This is one of 10 draft laws to be voted on in the current session.

According to the NA Commission for Economic Affairs, as the country’s central bank, the SBV should assume an active role in, and responsibility for, national monetary policy to ensure flexibility and synchronisation with national financial and economic policy.

As a ministry-level agency, the SBV needs to operate in line with the political and socio-economic development of Vietnam, as well as the country’s global integration process.

Annual inflation index decided by the NA

Most NA deputies agreed to amendments to the draft law on the SBV (revised) discussed at the current session.

However, some NA delegates raised their concerns about a number of regulations in the draft law regarding the national monetary policy and the relative competences and responsibilities of the SBV, the NA, and the Government for deciding and implementing the national monetary policy.

They proposed that the NA set the annual inflation index and oversee implementation of the national monetary policy.

Many deputies agreed that it is not just up to the NA to identify or fix inflation targets because that does not conform to the constitution and the NA charter under which the NA has the jurisdiction to decide major annual socio-economic targets.

The inflation target is an important economic device which reflects the value of the currency and affects other important targets. It needs careful consideration before setting other macro-economic targets and working out measures and policies to manage the economy.

Deputy Phan Trung Ly of Nghe An province pointed out that, according to article 84 of the constitution, the NA has the jurisdiction to decide the nation’s financial and currency policy.

Regarding the management of the interest rate defined in article 12 of the draft law, Deputy Cao Sy Kiem of Thai Binh province favoured continuing to use the interest rate mechanism to ensure State management of the currency market.

SBV direct intervention recommended

Mr. Kiem said it is necessary to allow the SBV direct intervention in the interest rate mechanism of credit organizations in order to stabilise the market.

“The SBV’s intervention will ensure its management, adjustment, and the stabilisation of the market, in conformity with international rules,” said Kiem.

As to bank regulation and oversight, deputies recommended focusing on the operation of credit organizations, and closely monitoring the effectiveness of their investments.

In reference to the law governing the right to use the exchange reserve of the SBV, Deputy Pham Thi Loan of Hanoi said any decision to use the exchange reserve for state budget-related expenditures areas should be made by the NA.

NA deputies will soon open a discussion of the project to build a Hanoi – Ho Chi Minh City express railway.

Source: VOV