Finance ministry wants VND30-trillion loan from c.bank

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Finance ministry wants VND30-trillion loan from c.bank

Saigon Times - 8/1/2015 8:25:00 AM

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he Ministry of Finance intends to take out a loan of VND30 trillion (US$1.37 billion) from the State Bank of Vietnam (SBV) to finance the State budget deficit.

Deputy Minister Huynh Quang Hai told Vietnam Television (VTV) on Wednesday night that in case the State budget is in temporary deficit, the ministry could take out a loan from the State Bank of Vietnam (SBV) and repay it within the same year in line with the laws on State budget and the central bank.

News about the ministry’s proposal for a central bank loan came from the website Vinanet of the Ministry of Industry and Trade. After local media’s attempts to seek to confirm the news, the deputy minister told the national television station about the proposal.

According to Article 23 of the State Budget Law 2002, the SBV is tasked with working with the Ministry of Finance over borrowing and repayment plans and strategies for internal and external loans, implement borrowing plans to fund budget deficit, and advance money to solve temporary budget deficits as per Prime Minister decisions.

The article is still kept in the revised State Budget Law passed by the National Assembly lately. Therefore, the ministry’s proposal is deemed lawful.

However, doubt has been cast on the ministry’s transparency and accountability of the loan package after an interview with Hai on VTV.

Hai said budget collections in the January-July period reached 59.5% of the target, which was a good result. But he earlier mentioned budget constraints.

There are several other issues concerning the borrowing proposal, such as source of money, interest rate, alternative fund-raising channels like government bond sales, where to spend money, and impact on inflation and macroeconomic stability.

The State budget used to borrow US$1 billion from the SBV’s foreign reserves to subsidize interest rates and stimulate aggregate demand in 2009. The loan, according to the World Bank and research institutes, worsened the real estate bubble, caused inflation to surge and led to macroeconomic instability in 2010.

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