VN urged to cut interest rate to help local firms

This should be one of several drastic actions “bravely” taken by the Government soon, it said, pointing out three main arguments for an immediate rate cut.

Firstly, the interest rates of government bonds tend to decline at the end of the year.

Secondly, inflation is being tightly controlled at below 8 per cent, which means that there is little difference between deposit interest rates and inflation rates.

There is no risk of deposits being withdrawn from the banking system as well, as other investment channels including gold, securities and property are too tough at present.

Thirdly, exchange rates are stable and people no longer prioritise holding foreign currencies.

The committee said it supposed that interest rate cuts did not affect people depositing money at banks, citing that deposits had increased about 15 per cent this year although mobilising interest rates had been slashed by 5 per cent since the beginning of the year.

Government Office vice chairman Pham Viet Muon said the government would look at falling consumer price indices over the past months and hold a meeting this week to discuss interest rate adjustment.

He said that 7.5-8 per cent would be an ideal mobilising rate for now and if these levels were reached, banks would be able to set lending rates at 10 per cent.

The committee said interest reduction should be considered a prerequisite to helping enterprises solve difficulties. “The number of companies dissolving and halting their operations continued to increase in November and there is no sign that this will stop; firms are still facing challenges in all aspects,” it said.