Under the plan, farmers will have access to interest-free bank loans to buy farming tools and processing equipment, the government said on its Web site.

The government will also subsidize part of the interest paid on bank loans used to buy fertilizer, insecticide and construction materials, the report said. The state will subsidize interest payments of up to 4 percent on the loans, which typically carry interest rates of 10-11 percent annually.

The duration of the interest-free loans will be 12 months, while the maturity of the subsidized loans will be two years, the report, said adding the loans will only be used to buy domestically made products.

This stimulus plan will help "production and consumer in the agriculture and rural sector, one of the sectors worst affected by the global economic recession," the report said.

The report did not say how much money the government will spend for the new stimulus plan.

The global economic downturn has cut into export demand, affecting export-driven economies such as Vietnam.

Vietnam's exports grew only 2.4 percent in the first quarter of this year, comparing with the export growth of 29.5 percent for the whole year of 2008, according to the General Statistics Office.

Many of Vietnam's export items are farm products, and the slowdown in exports have badly affected farmers, who account for more than 70 percent of the country's 87 million people.

Vietnam's economy grew only 3.1 percent in the first quarter, the lowest rate in a decade as the global economic slump dragged on exports and construction.

The country's economy has expanded an average of 7 percent a year the past decade, but it began overheating last year with inflation skyrocketing and the trade deficit ballooning. The economic growth slowed to 6.2 percent in 2008.

The government has lowered its 2009 growth forecast from 6.5 percent to 5 percent.

International financial institutions forecast that Vietnam's economy could grow between 4.5 percent to 5.5 percent _ still one of the fastest-growing in the world but significantly slower than the previous pace.

Earlier this year, the government announced a $1 billion stimulus plan as part of efforts to keep the economy growing.

The money was used to subsidize bank loan interest for enterprises. So far, local companies have borrowed more than 220 trillion dong ($12.5 billion) under that program.

The Associated Press - April 19, 2009