Bandmaster in the age of inflation

VietNamNet Bridge – “Today, I can say that the top goal – controlling inflation – has been realised. This judgment is not subjective, but very practical. If we don’t make that judgment and continue focusing on inflation, it would be terrible,” said Prime Minister Nguyen Tan Dung.

Dung made the above comment seven months after he signed a document setting forth seven groups of measures to control inflation and stabilise macroeconomics. But to get those measures required some effort.

In early months of the year, some cabinet members still wanted to maintain the goal of high economic growth, arguing that the Vietnamese economy got a boom in 2007, one year after joining the World Trade Organization (WTO), and this growth impetus needed to be maintained in 2008.

However, bad signs began to appear. The trade deficit of the first quarter was equivalent to that of the entire 2007; interest rates were much lower than inflation; there were wild fluctuations of exchange rates, etc. Identifying difficulties to change economic goals when optimistic thinking dominated was a great difficulty.

“At that time a question was posed: Is it necessary to set the goal of controlling inflation or still give priority to the goal of economic growth? That was a hard question,” the Prime Minister said during a meeting of officials of the Ministry of Planning and Investment (MoPI) last week.

The MoPI is responsible for designing annual economic development plans. The cooperation between this agency and others, especially the State Bank of Vietnam and the Ministry of Finance, sometimes was not very good, Minister Vo Hong Phuc admitted, leading to wrong assessments about the economy.

It was not until March 2008 that the MoPI received data about the total means of payment and outstanding debts in 2007, the main causes of high inflation, from the State Bank of Vietnam.

The data “scared” the Prime Minister, as Minister Phuc told the National Assembly in May.

At that time, some officials proposed assigning the task of designing social-economic development programmes to the Ministry of Finance and the State Bank of Vietnam, lessening the role of the MoPI. It is said that the Ministry of Finance and the State Bank of Vietnam “didn’t dare” accept this duty.

In that situation, a group of MoPI experts quietly designed a draft document on eight groups of solutions to curb inflation, including tightening monetary policies, reducing the trade deficit, etc.

The draft, after being considered by related ministries and approved by the Politburo and the National Assembly, was signed by the PM on April 17. A member of the compilation team said if the document had been issued much later, the current economic situation might have been very bad.

The PM re-confirmed the function of the MoPI as “a think-tank for social and economic development strategies of the country” in Decree 116 dated November 14, 2008.

Minister Phuc said the MoPI would try its best to carry out this role. The ministry is working on a plan to cope with economic slowdown next year to submit to the government later this month. One of the key measures may be stimulating investment and local consumption.

(Source: SGTT)