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interest market control can lead to the distorted
development of financial market and instability
of the economy.
FromJune, 2002, the SBVapplied the negotiated
rate mechanism and eliminated the limit on
lending rate, allowing commercial bank and their
customer to negotiate lending rate. However, in
2007, SBV applied some administrative measures
in the monetary policy management and this
measures were effective, but they left great
consequence. Thus, the views on the interest
rate liberalization of Vietnam in the coming time
should focus on the following issues:
Firstly,
the time and speed of the interest
rate liberalization: Basically, the interest rate
liberalization should be implemented at the same
time with the restructure of financial system
and the economy. Vietnam is the country which
is experiencing macro and finance imbalances
and having incomplete legal framework and
financial market supervision, so that commercial
banks system which is in restructure process
so the quickly implementation of interest
rate liberalization will cause negative effects.
Moreover, the ineffective operation of SOE
system, the lack of competitiveness of commercial
bank system on products, service (mainly
compete on price through interest rate) and the
lack of transparency on customer’s information
who is lending make it hard to determine the
interest rate consistent with the capital supply
and demand of the market. The process of rapid
or slow interest rate liberalization depends on the
interest rate risk management capacity of banks
and borrowers.
Interest rate liberalization will lead to increase
inflation” to “ high growth, moderate inflation” in
2004-2007 period, to “relatively high growth, high
inflation” in 2008-2011 period, “low growth, low
inflation” in 2012-2014 period and “stable growth
and inflation” in 2015-2015 period. The result
for 3 years (2015-2017) showed that the relative
stable of Vietnam’s economy was the condition
to accumulate the necessary factors for the future
high-growth period.
The central content of monetary policy
management in the coming time
Promoting the achieved results, in the coming
time, monetary policy management should focus
on the 3 following keys issues:
Firstly,
selecting and committing to implement
the priority objectives of monetary policy; The
implementation of a monetary policy having
priority objectives would help the work of
monetary policy management of the SBV
more consistent and also increase the market
orientation. Accordingly, the Government of
Vietnam should complete the legal documents
which clearly regulating and giving tasks for
SBV in order to concentrate on pursuing one
major objective. Maintaining stable price, which
was reflected by low inflation and supporting to
economic development objective should be the
ultimate objective of monetary policy. In addition,
instead of managing a monetary policy which
was closely near a fixed rate, SBV could build and
announce a targeting inflation regional as an basis
for monetary policy management and orient the
inflation expectation of public. If this measure is
implemented, it will create flexibility for the work
of SBV’s management. This is also a preparatory
step for the switch to manage monetary policy in
line with targeting inflation in the future when
having necessary conditions.
Secondly,
limiting administrative measure in
interest rate management, towards using indirect
tools. The application of the administrative
intervention mechanism to interest rate is only
effective in short-term if the level of financial
market development is low, indirect control
tools are not effective and SBV’s financial
market control capacity is limited. In long-term,
as interest rate is a variable which has great
influence to the operation of economy, the direct
FIGURE 3: VIETNAM’S ECONOMIC GROWTH AND INFLATION
RATE SPEED (%)
Source: General Statistic Office
