Vietnam allows more loans at negotiable rates

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The government has allowed commercial banks to offer short term loans at negotiable interest rates to ensure enough credit for profitable projects, an official said Thursday.

The State Bank of Vietnam will be responsible for taking measures to lower lending interest rates, chief of the government's office Nguyen Xuan Phuc said at a press briefing in Hanoi.

He was announcing new government guidance following a regular meeting to discuss social and economic issues.

In late February this year, the government allowed banks to set interest rates for medium and long term loans on a negotiable basis. Previously, rates on all loans except for consumer loans were capped at 1.5 times the central bank's benchmark base rate.

Phuc announced Thursday that the government has passed a resolution on measures to ensure economic stability and control inflation.

Under the resolution, authorities and companies have to keep fuel, power and coal prices stable and ensure a sufficient supply of other essential goods including steel, cement, medicine, sugar and milk.

The Ministry of Finance on Thursday said fuel traders had to halt price hikes and a state-reserved fund would be used to offset their losses if global prices surge.

The ministry also requested that the government expand the required separation between two consecutive fuel price hikes to 30 days. Traders are currently allowed to increase pump prices every 10 days.

Trade deficit

The government has ordered ministries and local governments nationwide to tighten control over state-funded projects and withdraw money from ineffective ones, Phuc said.

Vietnam's economy expanded 5.83 percent in the first quarter from a year ago. Government officials agreed that economic growth was much faster than the 3.14 percent expansion in the first quarter last year. But the economy is still facing many difficulties, including a large trade deficit and instability on the financial market.

The import of unnecessary products must be restricted and exports must be boosted to narrow the country's trade gap, Phuc said.

"It's not necessary for a poor country to spend US$1 billion importing the iPhone," he said.

According to the Ministry of Industry and Trade, local companies also imported equipment worth billions of dollar to develop high-speed 3G mobile phone services in the country.

Vietnam's monthly trade gap in March was $1.35 billion, up 2 percent from February, according to the General Statistics Office. The year-to-date trade deficit has reached $3.5 billion.

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