Policy makers mull huge stimulus package amid concerns
Sources from the Ministry of Planning and Investment and the State Bank of Vietnam said the package might come from the additional government bond issues, and the money would be used to restart half-done public projects, supplement reciprocal capital for ODA projects and pull the economy out of the doldrums.
However, careful considerations are being given to the plan as it might leave an adverse impact on inflation that has been largely contained in the year’s first half. Besides, the plan will have to seek approval from the National Assembly.
The stimulus plan is almost similar to what Deputy Prime Minister Vu Van Ninh said at a Government meeting last month. Ninh said then that the Government would submit the supplementary bond issuance scheme to the National Assembly in October.
According to Ninh, the Prime Minister has allowed provinces to advance VND5.1 trillion from the aforementioned financial package to accelerate the progress of the projects to upgrade national highways 1 and 14 that have been five years or so behind schedule.
In addition, the stimulus plan is similar to the proposal of the National Financial Supervisory Commission, which stated that the Government should boost spending on public investments by issuing bonds for big projects that are lacking capital. This will help unfreeze capital flows for infrastructure construction and ensure capital needed to achieve the growth target.
The commission also proposed the Government advance capital from next year’s bonds to meet the disbursement demand this year.
Overall, ministries and agencies started to consider this financial package after Nguyen Van Giau, chairman of the National Assembly’s Economic Committee, had said at the recent NA sitting that policies should focus on growth targets.
The stimulus plan sparks concerns, however.
Vo Tri Thanh, deputy head of the Central Institute for Economic Management (CIEM), called for prudence with such a financial package.
The stance of the Prime Minister’s policy advisory group with Thanh as a member is that high caution must be taken, he said.
“Macro-economic achievements gained so far must be continued. Moreover, the Government needs to ensure the consistency of its policies in pursuing macro-economic stability,” Thanh told the Daily.
Therefore, he warned that if the financial package of as much as VND100 trillion was offered, it would go against the above aim, especially the fight against inflation.
Besides, the lesson of the stimulus package in 2009 should be taken into account.
Nevertheless, according to Thanh, the advisory group has reported to the Government that a reasonable package be offered by accepting a budget deficit of over 4.8% of GDP, issuing more government bonds and selling stakes in State-owned enterprises.
Currently, the Government has implemented some measures to support the market like tax exemption, reduction and extension for enterprises and the VND30-trillion package for real estate.
According to the General Statistics Office, total investment capital reached only 29.6% of GDP in the year’s first six months, which is the lowest in as many years. Besides, despite the growing credit package, capital just moves within the banking system rather than being channeled into the economy.
