Vietnam SBV to Extend Subsidizing-lending Program through end-2011

The State Bank of Vietnam, the country’s central bank, has decided to extend the government subsidizing lending program with a 4% interest rate support by two more years through the end of 2011, the central bank said on its website.

 

The central bank said in a statement that its move will help local companies to gain access to medium and long-term capital amid the current global economic downturn.

Since it was launched in early February, banks and financial companies had phased out VND409.4 trillion in loans (US$22.9 billion) as of Oct. 8, the central bank said.

 

The subsidized loans will distort the monetary market and widen the state budget deficit as they have accounted for 25% of the domestic economy’s outstanding loans so far, Tran Hoang Ngan, an economist-member of the government’s National Committee for Finance and Monetary Policy assessed.

 

The state budget deficit is forecast to widen to 6.5%-7% of GDP this year, which is an accepted level if compared with 13% of the U.S., Ngan noted.

 

This year Vietnam is planning to increase its total investments by 17% this year to US$40 billion for economic development programs and projects, state media reported.

The government is targeting to achieve the GDP growth of 5%-5.2% this year and 6.5% next year. (SBV)