The Government has set the fight against the inflation as the top priority task for now. What has the State Bank of Vietnam been doing to implement this top priority task?

The State Bank has been trying to control the total payment instruments and cap the credit growth rate at 30% this year. After a lot of measures taken recently, relating to the interest rate, exchange rate policies, compulsory reserve ratio and bond issuance, I think that the goals of controlling credit growth will be achievable. However, I have to say that the situation is very complicated, inflation has become the problem of the world, and there may be something we cannot anticipate.

Some experts said that all the financial measures by the State Bank of Vietnam have been taken suddenly, making big difficulties for commercial banks’ operation as they did not have time to get adapted to the new circumstances. Do you agree with that opinion?

I don’t think so. Last year, when there were the signs of high inflation, on May 28, 2007, Governor of the State Bank of Vietnam decided to double the required compulsory reserve ratio on deposits, and banks only had 33 days to implement the instruction. Meanwhile, in 2008, banks had 45 days to get prepared for paying higher compulsory reserve ratio, and 35 days to arrange enough capital to purchase compulsory bonds.

I believe that banks had enough time to get prepared for all these decisions, because they implemented the instructions well. In fact, some credit institutions met difficulties, but they could overcome the difficulties.

Of course, problems have been arising during the implementation of the tightening of the monetary policies, which requires the exertion of all people and institutions.

Why did the State Bank decide not to raise the compulsory reserve ratio further, while issuing on-year term compulsory bonds, which will make the bank to spend several thousands of billions of VND to pay interest?

All countries in the world have to accept to pay expenses while implementing monetary policies. If we had continued raising the compulsory reserve ratio, this would have caused a heavy burden to borrowers. Therefore, the State Bank decided to issue compulsory bonds in order to harmonise the benefit of different groups.

Several years ago, the State Bank removed the mechanism on setting up the ceiling interest rates, but now it announces that the deposit interest rate must not be higher than 12% per annum. Is there any conflict in the decisions by the State Bank?

The intervention of the State proves to be necessary when the market shows insecurity. Our economy is a market economy put under the management of the State. I don’t think that there is any conflict in the moves by the State Bank, because the bank’s decisions all have been applauded by commercial banks and the society at large.

However, you once said that you advocate the interest rate liberalization policy?

The interest rate liberalization should be understood that this should fit to the different development periods of the economy and it will still need the state’s management.

The high inflation rate always means the devaluation of the local currency. However, the situation is now quite different: despite the high inflation, the VND still keeps revaluating. What would you say about this?

The foreign exchange policy is quite a different category. It would be wrong to compare the value of the dollar, which has been devaluating all over the world with VND and say that the VND is revaluating.

Research has pointed out that the countries which have the central banks with high independence of operation can control inflation most effectively. Do you think that the limited independence of the State Bank of Vietnam is the main reason that has been causing difficulties in curbing inflation?

In Vietnam, the central bank is put under the Government, therefore, the Government takes the management and the central bank implements its instructions. I understand that you want to mention the independence of the central bank as it is being seen in developed countries. However, I cannot say anything about that at this moment.

Source: VIetnamnet