Sunday, 14 November 2010

Vietnam: In critical situations, information must be transparent

Last update 08/11/2010 03:35:07 PM (GMT+7)

In critical situations, information must be transparent
VietNamNet Bridge – When the national economy shows signs of uncertainties, experts say, the information released by management agencies must be transparent, while the policies must be consistent in order to stabilize the market and calm the public down. However, these things are still not evident in Vietnam.

At a recent press conference where urgent measures to regulate the national economy were informed, Le Duc Thuy, Chair of the National Finance Supervision Council, stressed that one of the most important measures to stabilize the market is to provide accurate and transparent information in order to create public confidence.
Nevertheless, the two most important agencies in charge of regulating and supervising monetary policies prove to be contradictory with each other. 
Whom to believe?
Le Duc Thuy, Chair of the National Finance Supervision Council told the press that in the first 15 days of October, the Vietnam dong deposits at banks were reduced by 45 trillion dong ($2 billion) in comparison with late September. 
Also according to Thuy, the deposits in foreign currencies have been increasing. By late September 2010, the foreign currency deposit balance had been 40 trillion dong lower than the foreign currency outstanding loans. Meanwhile, the gap between the deposit balance and outstanding loans in foreign currencies had reduced to 20 trillion dong by early October, which meant that the foreign currency deposits had increased by 20 trillion dong. The figure has been explained by the fact that people have withdrawn Vietnam dong to purchase foreign currencies or gold.
However, after that, the State Bank of Vietnam affirmed that some newspapers reported wrong information about the Vietnam dong deposit balance, saying that in fact, the Vietnam dong deposit balance at the banking system has been increasing.
According to the State Bank of Vietnam, by October 15, the Vietnam dong deposits had increased by 0.64 percent (nearly 5400 billion dong) in comparison with September 30, 2010. Therefore, the central bank has accused some newspapers of reporting wrong information.
Regarding the interest rates, Thuy has said that the Government does not strive to slash interest rates at any cost and that it allows commercial banks to set up the deposit and lending interest rates in accordance with the market supply and demand.
However, in a meeting with representatives of the Vietnam Banking Association (VNBA) and representatives from commercial banks on November 5, chaired by the State Bank, when there was a proposal to raise the ceiling deposit interest rate from 11 percent per annum to 12 percent, the State Bank requested VNBA to come forward and to coordinate the implementation.
This has caused conflicting information about the intervention by the State Bank of Vietnam in the implementation of the new interest rates.
After that, an official from the State Bank said that easing interest rates is the decision of VNBA’s members, and that the management agency does not intervene with their decision.
However, people still have doubts about the intervention of the management agencies in banks’ operation. Two weeks ago, commercial banks were put under  pressure to push their interest rates down, though the inflation rate in the first nine months of the year was relatively high.
Macroeconomic stability – the top priority task
Thuy has admitted that the consumer price index (CPI) has been increasing and causing concerns. Macroeconomic stability should be seen as the top priority task, and curbing inflation is the most important goal.
In fact, right at the beginning of October, economists issued warnings about the possible high inflation rates. Vo Tri Thanh, Deputy Head of the Central Institute for Economic Management stressed that it was necessary to continue to tighten monetary policies in order to curb inflation. “Everything is very clear: the macroeconomic stability must be the top priority,” he said
At this moment, the most important thing is that management agencies need to do is to provide transparent information and keep consistent policies so as to avoid eroding the public confidence.
Le Khac

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