Mr Hung said that the most important tasks the Government had to fulfill were to curb inflation and ensure a high economic growth rate.
Mr Hung said that the two works proved to be difficult to fulfill at the same time. In principle, the measures to ensure a high GDP growth rate lead to a high inflation rate. Therefore, the Government will have to find solutions that can harmonise the two tasks.
According to Nguyen Ngoc Bao, Head of the Monetary Policy Department under the State Bank of Vietnam, the bank had taken a lot of measures to control the monetary increase in the first six months of the year. The bank has required the higher ratio of compulsory reserve in order to withdraw cash from circulation, apply open market tools in order to keep the credit at a suitable level. These have helped ensure high economic growth and curb inflation.
Mr Bao said that the National Assembly had said the inflation rate must be lower than the GDP growth rate.
Mr Bao has stressed that the central bank will try to withdraw money from circulation, but keep the interest rates and exchange rates stable. Moreover, the central bank will ask commercial banks to expand loans at a suitable level in order to ensure sufficient capital supply for production and business.
When asked if the central bank feared uncontrollable inflation when it decided to tighten the monetary policy, Mr Bao affirmed that inflation remained within control. However, the central bank, in a cautious step, needs to take action to control the situation and cope with possible unexpected changes.
The statement by the central bank about withdrawing cash from circulation can be understood that the volume of cash in circulation is overly high. Mr Bao said that foreign currency supply proved to be profuse thanks to high direct and indirect investment. Therefore, the central bank has to spend a big sum of money to buy foreign currencies.
“The volume of cash in circulation needs to be kept at a suitable level and in harmonisation with the total value of goods, after considering the situation and inflation rate,” Mr Bao said.
Mr Bao has also revealed that the growth rate of mobilised capital is now higher than the rate of loaning, which has led to the excess of usable capital.