Vietnam should loosen its monetary policies in order to ease credit access and boost production instead of trying so hard to contain inflation, a government advisor has said.
The country needs to accept a resonable inflation rate and create a mechanism to promote production, not tighten monetary policy, Tran Hoang Ngan, a member of the National Monetary and Financial Policy Advisory Council, said in an interview published in the Tuoi Tre newspaper Monday.
"We need more production capacity to have more goods, or else we will have to import more and a widening trade gap will create even more pressure on the exchange rate," he said.
Ngan said tightening monetary policy did not help bring down prices. The problem is it has caused interest rates to surge, which in the long term could lead to a shortage of goods and less jobs being created.
But Ngan also noted that when the government loosens its monetary policy, it also needs to tighten control over public spending and keep foreign exchange rates stable.
A project to reduce the "dollarization" of the economy should be implemented to help control inflation, Ngan said.