If monetary policy management were unsure, Vietnam would miss the opportunity to attract social capital, foreign direct investment (FDI) while shifting capital flows.
A member of the National Financial and Monetary Policy Advisory Council had expressed his view when the prime minister proposed donation experts to attract social investment, private investment, FDI and mentioned how to increase overspending, public debt.
In his opinion, it was necessary to consider monetary policy. By the first six months, the average consumer price index (CPI) had increased by 4.19%, while the pressure of 2020 was to carry out the resolution of the National Assembly, the CPI was below four percent. To maintain this goal, operating the last six months was very important to control the price increase factors affecting CPI, such as pork price, textbook price, electricity, clean water. Charges must also be considered very carefully.
The expert noted that, if from then until the end of the year, the price of gasoline recovered, the credit balance would not be as low as the first six months of the year and reach the target rate of 14%, the inflation pressure would surely increase.
In the immediate future, it was necessary to use the measures of review and restraint, as mentioned above. However, in the long run, to ensure a balance of goods money and so on, to control the money supply in each period were also crucial. Recently, the monetary level had been eased to a certain extent to lower lending rates. Banks also shared with businesses. Still, if the price of oil and credit increased, inflationary pressures would rise.
However, with the development of the Covid-19 epidemic, with the difficulties of the world economy, the aggregate demand decreased, avoiding the pressure of price increase in the world market. Therefore, if operated well, Vietnam’s CPI this year might still be below four percent.
In the long term, monetary policy must always be prudent and flexible; if loosened, it would disrupt financial stability, increase inflation, exchange rates fluctuate, causing damage to the investment environment.
With the current Vietnamese economy, while the gross domestic product (GDP) was at $280 billion, over 70 percent of which was final consumption, domestic savings to accumulate for investment was very little, then for growth, it would still need capital. Thus, where to get money to invest? The answer was domestic and foreign resources, including FDI, borrowing to offset the budget deficit as well as other foreign loans.
However, in order to attract external financial resources, it was evident that monetary stability and exchange rates must be stabilised. If the operating monetary policy were not sure, the indirect investment might draw massively; the direct investment might move to other places, Vietnam could not catch the wave of investment.
The Covid-19 pandemic had many negative impacts, but it was also an opportunity. If Vietnam were committed to stabilising monetary policy, this opportunity would attract domestic and foreign resources.
In addition to monetary policy, to support businesses both in the short term, in the medium and long term, fiscal policy should be taken into account. In that case, could the current budgetary policy be relaxed?
According to the expert, that case was possible. A few years ago, public debt was over 64 percent of GDP, close to the ceiling of 65 percent allowed by the National Assembly, and the geographical position was no longer available. In the reality of many countries, this had enormous consequences. But at this moment, public debt was about 55 percent of GDP, 10 percent below the ceiling. Therefore, there was capacity left for the policy to relax.
On the other hand, fiscal policy often moved in the opposite direction of the economic cycle. When the economic cycle was in the development stage, it was necessary to increase revenues, reduce expenditures, balance the budget to have a surplus to improve the state potential, and at the same time, have sources to pay the principals and interests. When the economy was in recession, fiscal policy must be relaxed to overcome that consequence. At the moment, Covid-19 had sharply reduced the growth rate. Hence, to recover, monetary policy had to be loosened in the current context of public debt.
Nevertheless, at present, there was no need to loosen the policy, because there were many things to increase spending, but the source was relatively enough. The budget reserve was tens of trillion dongs, which allowed dealing with arising problems, especially natural disasters. Apart from that, the government also had the right to use financial reserves.
Not to mention that in 2019, both central and local revenues were relatively large, and this source had allowed the National Assembly to move to 2020 to prioritise handling urgent issues. In case of necessity, according to the State Budget Law, the government had the right to advance the 2021 budget estimates for handling.
The expert believed that if the government submitted the scheme on easing the fiscal in the coming years to control, ensure the right and right places in trouble to enhance the macro-economic stability, remove difficulties for enterprises, increase the competitiveness of the economy, the National Assembly deputies would surely support it. The remaining issue was the quality of the public investment project and the question of how convincing the budget project.
In such context, would the pressure to decide and monitor issues related to the budget, so as not to waste even a taxpayer of the people as the prime minister said, of the National Assembly be heavy?
Socio-economic fluctuations caused by Covid-19, due to the US-China trade war, require unintended expenses. As mentioned above, regarding the source and mechanism, the National Assembly had allowed, the remaining problem was that the government operated following the goals, regulations.
Monitoring was necessary, but the vital thing in budget management, in particular, public asset management, in general, was to comply with the law.
It was also necessary to clarify the oversight responsibility not only of the National Assembly but also of elected bodies. However, in the expert’s opinion, too many supervisory and ineffective supervisory organisations might seem to be abundant.
Once, in some businesses, 18-19 delegations were joining, inspecting and supervising in the six months that, but found nothing wrong, only minor problems. That made it difficult for businesses, clouding the business environment.
The critical current issue of Vietnam was the management and use of public assets. Public finance should be transparent and open for all people to supervise. It was expensive but essential to ensure financial discipline.
With the National Assembly, committees, delegates needed to accompany businesses, with the government to study and consider the key issues, the bottlenecks that threatened the survival of enterprises were hindered the development of the economy. From there, it could coordinate with the government in the process of formulating policies to submit to the National Assembly.
Delegates must also take the initiative so that when the government submitted, the National Assembly could criticise. Including issues that the government did not offer, but as delegates, if it were deemed necessary to create a mechanism, they might propose policies. However, to do so depended on the capacity of the delegates, to avoid discussing too many apparent issues, ignoring the required critical problems.
