The government will be cautious with its plans to rescue local businesses as it does not have enough resources for an extensive bailout, Deputy Prime Minister Vu Van Ninh said Friday.
When businesses are facing many difficulties, the government needs to offer support, but companies themselves have to restructure to survive, he was quoted by the VnExpress newswire as telling the press on the sidelines of a National Assembly meeting in Hanoi.
"The government is not capable of rescuing businesses on a large scale and in fact it should not do that," Ninh said. He also noted that it is necessary to make sure that measures taken to support the economy will not risk bringing back problems.
Vietnam's central bank has already cut policy rates by four percentage points over the past four months, and is planning to reduce borrowing costs further with a lower ceiling on deposit interest rates next week.
The government is also considering plans to lower taxes to spur consumption and ease burdens for local businesses, after the economy expanded at 4 percent, an unsually low rate in the first quarter.
Ninh said interest rates have been falling faster than expected by the government, calling it a "positive" trend.
"The key issue now, which has been identified by the government as a "˜blood clot', is the bad debt problem. If debts can be restructured, businesses will be able to access loans."
The State Bank of Vietnam last week announced a plan to establish a company to buy back distresssed debt from banks to unblock credit flows. The plan, however, has raised concerns among economists, who say it is not advisable to pump more money into the economy and help rescue banks that have engaged in risky lending practices.
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