The government has ordered the central bank to take drastic measures to deal with bad debts and make credit more accessible to businesses in order to boost economic growth.
Even though interest rates have fallen, they are still very high, with credit expanding at a slow pace in the first six months, the government said in a report, without giving any numbers.
Minister Vu Duc Dam, head of the Government Office, said Tuesday that the central bank needs to deal with the bad debt problem so that commercial lenders can offer loans to businesses.
"One of the measures is to establish a company to buy bad debts, but it doesn't mean the State Bank of Vietnam has to wait until such a company is established to start dealing with the debts," Dam told a press briefing in Hanoi.
He also allayed concerns that the bad debt trading plan could cause inflation to surge, saying only financial tools, not cash, are used to buy the bad debts.
According to the central bank, bad debts in Vietnam hit US$5.18 billion, or 4.14 percent of total loans as of April, up from 3.06 percent in 2011.
Nguyen Thi Hong, the central bank's monetary policy director, said specific plans to solve the bad debt problem are still being considered. She added that the central bank is also finalizing plans to deal with weak banks in the country.
Dam said Vietnam is likely to achieve the goal of keeping inflation in single digits but inflation rate should not be too low in order to ensure stable economic growth.
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