The State Bank of Vietnam has been taking actions to tighten the monetary policy, but the moves do not help much: the prices continue soaring.

Head of the Price Control Department under the Ministry of Finance Nguyen Tien Thoa, said that comprehensive measures need to be taken at the same time.

What are the main reasons behind the high inflation rate in the first two months of the year?

I think there are two main factors, which have directly led to the high price increases. The first one is that the volume of cash in circulation and credit volume have increased considerably, that exceeds the commodity supplies. The second one is the higher prices of food and foodstuff, and main consumer products.

Do you mean that the main reason behind the price increases is the commodity shortage?

No, it is not the only reason. There are a lot of factors that push the inflation rate up: the foreign investment capital keeps increasing, while our capability to control investment flows remain limited, and the low capability to absorb the capital can also be cited as the reason behind the high inflation.

I can also cite some other reasons, including the slow disbursement for state owned projects, low competitiveness of the national economy, unstable stock market, fluctuating real estate market and problems in loaning securities investments. Besides, the natural calamities and epidemics, which have made the supply of food become tense, can also be cited as a main reason that has caused high inflation rate,

The State Bank of Vietnam has taken several measures to tighten the monetary policy. But experts say the measures are not enough to curb inflation. What would you say about this?

Milton Friendman, an economist has a saying, the general ideal of which is that the inflation is always the result of the monetary policy. However, I agree with the experts that we should not rely on the monetary policy to curb inflation, while we need to take a lot of other measures as well, like limiting trade deficit, taking cautious in controlling rice exports in order to ensure food security.

Could you please elaborate on these measures?

As for the monetary policy, we need to control the money supply and provide credit at a reasonable level in order to prevent from bad credit development. Besides, we need to take initiative in buying foreign currencies to increase foreign currency reserves, while we need take measures to take money back from circulation.

As for loaning to real estate investors, we need to stop speculation, but have to continue lending to those, who really need money to buy houses for accommodation. We also need to control securities loaning.

Regarding the exchange rate, the VND should not go up and down too sharply, I mean, we accept the VND’s revaluation at a reasonable level.

Source: VNExpress