The Vietnamese government has submitted a report to the National Assembly on the implementation of Resolution No. 43/2022/QH15 on fiscal and monetary policies to support the economic recovery and development program.
Vietnamese Dong faces significant depreciation pressure
The government affirms that the issuance and implementation of Resolution 43 was a timely and prudent decision by the National Assembly, given the challenges faced by the country’s socio-economic development due to the severe impact of the COVID-19 pandemic.
The resolution, passed at an extraordinary session with unprecedented policies, provided support for COVID-19 prevention, control, and economic recovery.
According to the report, Vietnam’s GDP growth in 2022 reached 8.12%, the highest in the 2011-2022 period. However, in 2023, the GDP growth rate dropped to 5.05%, lower than the target but still relatively high compared to other countries in the world and the region.
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Regarding interest rates, the government stated that the Vietnamese dong faced significant depreciation pressure in 2022 due to tight monetary policies, rising interest rates, and a strong US dollar in other countries; in September-October 2022, the dong faced depreciation pressure of up to 9-10%.
The rush to withdraw money from SCB was among the factors that increased pressure on domestic interest rates and exchange rates, creating inflationary pressures.
In this challenging context, the State Bank of Vietnam adjusted its operating interest rates by 0.8-2% per year in September and October 2022 to stabilize the macro-economy, curb inflation, support economic recovery, stabilize exchange rates and the foreign exchange market, and ensure safe banking operations.
The government affirmed that “the interest rate hike was consistent with the domestic macroeconomic conditions and the international context, given Vietnam’s highly open economy and deep international integration.”
In 2023, as global interest rates continued to rise and remain high, the State Bank of Vietnam has consecutively reduced operating interest rates four times since March 2023, with a reduction of 0.5-2.0% per year.
In terms of fiscal policies, the government exempted value-added tax, environmental tax on jet fuel, and value-added tax rates and other taxes, fees, and charges within the program’s scope in 2022, totaling VND 61,000 billion. This contributed to reducing costs for citizens and businesses and stimulating domestic consumption.
Proposal to extend capital disbursement period
The government proposed to the National Assembly to extend the implementation and disbursement period for the program’s investment capital. Specifically, out of the 272 projects assigned investment capital under the program, 107 projects have a disbursement rate of less than 50% of the allocated capital, including some large-scale projects with low disbursement rates.
These projects are unlikely to disburse all the allocated capital this year, despite the National Assembly’s permission to extend the implementation and disbursement period. Therefore, the government proposes that the supervisory delegation report to the Standing Committee of the National Assembly to allow the extension of the implementation and disbursement period for the program’s investment capital until the end of 2025.
The specific amount of capital proposed for extension until the end of 2025 for each project will be consolidated by the government and reported to the National Assembly for consideration and decision at the 8th session later this year.
Regarding the implementation of the policy to reduce the value-added tax rate by 2%, the government will summarize and evaluate the results, the necessity, and the ability to ensure central budget revenue to continue implementing the support policy in the last six months and report to the National Assembly for consideration and decision.
Luân Dũng
