Socioeconomic Development and Recovery Program Ratified

The extraordinary session of the National Assembly of Vietnam adopted the Resolution on fiscal and monetary policies to support the Socioeconomic Recovery and Development Program, with 424 votes of aye out of 426 deputies.

Accordingly, nearly VND350 trillion (US$15.5 billion) for fiscal and monetary policy packages in support of the approved Socioeconomic Recovery and Development Program will be disbursed in 2022 and 2023.

Increasing development investment by VND176 trillion

Among fiscal policies, the tax exemption and reduction policy includes a 2% reduction in value-added tax (VAT) in 2022, applicable to goods and services currently subject to 10% VAT (to 8%).

This policy is not applicable to telecommunications, information technology, finance, banking, securities, insurance, real estate, metal manufacturing, mining (excluding coal mining), coke, petroleum, chemicals, and goods and services subject to special consumption tax.

In addition, deductible expenses are allowed when determining taxable corporate income for support for COVID-19 pandemic prevention and control in Vietnam in 2022.

Also in the fiscal policy, the State budget for development investment will be increased by at most VND176 trillion (US$7.8 billion), focused in 2022 and 2023, including:

On health, a maximum of VND14 trillion will be allocated for building, renovating, upgrading and modernizing grassroots health facilities, preventive medicine, regional disease control centers and hospitals, and for training and improving the quality of health human resources, vaccine production and COVID-19 treatment medicines.

On social security, labor and employment, the Vietnam Bank for Social Policies will be granted a maximum of VND5 trillion, including VND2 trillion for interest compensation and management fee to provide the preferential loan policy under Program and VND3 trillion for interest rates which are currently above 6% per annum.

A maximum of VND3.15 trillion will be invested for building, restoring, upgrading, expanding and modernizing social assistance, training, vocational training and job creation facilities.

VND40 trillion for interest rate support

Also in the fiscal policies, at most VND40 trillion of interest rate support (2% per annum) will be granted through commercial banks for important industries, fields, businesses, cooperatives and business households which can repay debts; loans for upgrading old apartment buildings, and building social houses and worker houses. At most VND300 billion will be used to increase the registered capital of the Tourism Development Support Fund.

On infrastructure development investment, at most VND113.55 trillion will be spent on infrastructure development: traffic, information technology, digital transformation, erosion prevention, helping ensure the safety of water reservoirs, adapting to climate change, and overcoming consequences of natural disasters.

On other fiscal policies, support will come in the form of housing rents for workers in industrial parks, export processing zones and key economic zones (using about VND6.6 trillion from revenue increased and spending reduced by central agencies in 2021).

Besides, VND38.4 trillion will be used to increase the Government guarantee limit for domestically issued bonds to the Vietnam Bank for Social Policies for job creation, education, affordable social housing, and the National Target Program on socioeconomic development in mountainous areas in the 2021-2030 period.

Rescheduling debt repayment and keeping debt category unchanged

On monetary policies, the Resolution clearly states the consistent and flexible management of monetary policy tools to maintain macroeconomic stability, control inflation, ensure the safety of banking and credit institutions, and actively support socioeconomic recovery and development.

Relevant bodies will conduct research on stabilizing the maximum ratio of short-term capital used for medium and long-term loans, reasonably calculate the required reserve ratio, perform open market operations and refinance, and direct credit institutions to reduce operating costs in order to reduce lending interest rates by about 0.5%-1% in 2022 and 2023, especially for priority sectors.

In addition, loan repayment terms will be rescheduled and debt categories will be kept unchanged besides reduction and exemption of lending rates for borrowers affected by the COVID-19 pandemic. Economic and monetary developments will be closely monitored to find appropriate solutions and measures to support businesses and people and ensure the safe operation of credit institutions.

Liquidity will be appropriately regulated; investment disbursement will be accelerated to facilitate beneficiaries to access support packages. Authorities will be reasonably regulated, closely coordinating with fiscal policies, facilitating government bond issuance and allowing credit institutions to invest more in government bonds.

At the same time, up to VND46 trillion from other legal financial sources will be used to import vaccines, therapeutic medicines, medical equipment and supplies for COVID-19 pandemic prevention and control in case of need.

The Resolution also allows continued refinancing for the Vietnam Bank for Social Policies in order to provide loans for employers to pay wages for laid-off workers, pay wages for employees to restore business operations, and ensure feasibility and fast implementation. Balancing monetary support solutions for the Program with the overall bank restructuring plan will be specially controlled.

Other policies to execute the Program in 2022 and 2023 include using about VND5 trillion from the Vietnam Public Utilities Telecommunication Service Fund for telecommunications and internet infrastructure development. Of the sum, VND1 trillion will be used to provide tablets for needy students to study online. Besides, the Science and Technology Development Fund in business will be supported.

The Resolution will be effective from January 11, 2022 to December 31, 2023. Particularly, the fiscal policies of this Resolution will be applicable in 2022 and 2023. The Government is responsible for guiding and executing this Resolution and making year-end reports in 2022 and 2023 and a final report in 2024 to the National Assembly.

Source: Vietnam Business Forum