Stimulus package ineffective: seminar

Nations had pumped money into banking systems to ensure liquidity and loan availability, Nghia said, but policymakers had not anticipated that tanks would not lend their money if they could not be confident borrowers would be able to pay it back.

The international workshop was held to discuss effective solutions to the financial crisis and minimising impacts on the economy. The seminar was conducted by the Banking Institute, the State Securities Commission and Birmingham University.

State Bank Policy and Monetary Department director Nguyen Ngoc Bao said Viet Nam’s stimulus package, to provide businesses an interest rate subsidy of 4 per cent, had been the right decision to ease difficulties in sourcing loans.

In Viet Nam, if commercial banks lowered their interest rate to around 4 per cent, people would not deposit their money into bank accounts and move their funds into other investment channels such as stock, gold and real estate, Bao said. Furthermore, the stimulus package would help encourage businesses to borrow for their production and banks could increase their capital disbursement with support from the Government and the central bank, he said. With such moves, those who enjoyed stimulus packages would be eager to put their capital into production.

Bao warned, however, that the Viet Nam economy remained difficult and increasing trade protection throughout the world made it hard to export and attract foreign investment.

Disbursement within a short period of time would cause pressure on the State budget and international payments and prices of some key commodities would likely increase, plus the 8 billion dollar stimulus package would put pressure on inflation. To deal with the problems, the central bank would continue to regulate monetary policy to help mitigate the downturn, to maintain economic growth at 5 per cent and hold inflation to under 10 per cent, he said.

Nguyen Dinh Quang of the Banking Strategy Institute said the central bank should outline a specific plan on monetary policy. He added that the State Bank needed to accelerate supervision on banks and risk management for the banking system as well as ensuring interest for depositors in order to minimise shortcomings.