National Assembly to prevail over challenges

The state is tightening the purse strings to bring inflation to heel

Deputy Prime Minister Nguyen Sinh Hung told the National Assembly that the two targets along with ensuring social welfare was “a necessary and urgent task for 2011” and “a crucial propellant of the economy’s long-term stability and sustainable development.”

The move follow Vietnam’s continued high inflation jointly caused by many factors like global high inflation and price hikes in food, power, petroleum and gold.

According to the government’s report to the National Assembly last week, Vietnam’s consumer price index (CPI) which hit 6.12 per cent in the first quarter was “quite high” amid escalated power and petroleum prices.

The government reported though the global economic growth was forecast to reach 4.5 per cent in 2011, the world’s inflation would likely increase by up to 2 per cent year-on-year. Inflation in developing countries  is expected to hit 6 per cent this year.

Hung said that the government would apply a “tightened” and “prudent” monetary policy to bridle inflation in 2011 and ensure the macroeconomic stability, in which credit growth would be kept below 20 per cent, while money supply growth would be between 15-16 per cent in 2011, against 23 per cent in 2010.

“However, capital would also be sufficiently provided for agricultural and rural development, exports, supporting industries and small- and medium-sized enterprises. Capital for non-production sectors like property and securities will be limited,” Hung said.

The government is planning to ban unofficial trading in gold plate and proposed sturdy new fines for black market foreign exchange trading.

“If these solutions are implemented effectively, inflation pressures will calm down, credit quality will be improved, exports will be boosted and the trade deficit will be controlled,” Hung affirmed.

The government said that it would also stringently curtail public investment and reduce the state budget overspending.

“[State budget] collection sources will be checked, especially tax-related sources. All sectors’ frequent spending must be reviewed so that 10 per cent of which will be saved during the year’s remaining nine months,” said a government report.

The government noted that heads of state-owned units and localities were responsible for curtailing spending.

The Ministry of Planning and Investment (MPI) reported that it would collaborate with relevant ministries and localities to trim this year’s public expenditure, particularly public investment, from 2010’s 5.95 per cent of gross domestic product (GDP) to 3-3.5 per cent of GDP this year. In 2011, the government’s total public spending would be nearly VND519.3 trillion ($26.62 billion), down from VND669.63 trillion ($33.481 billion) in 2010, the National Assembly reported.

“We will continue deploying investigation teams in charge of inspecting and revising all projects and programmes using state budget and government bond-based investment capital. Any unnecessary project will be removed or delayed,” said MPI Minster Vo Hong Phuc.