The government will permit late payments of corporate income taxes in 2011, estimated at about 13 trillion dong ($631.5 million), Dung said in a statement posted today on the government's website. It will also submit a proposal to the National Assembly to lower and remove about 7 trillion dong in corporate and individual income taxes.

In the last six months of the year, the country will still face "many challenges" including high inflation and interest rates and a large trade deficit, Dung said. The government will "continue to carry out a tight, cautious and efficient monetary policy," he said.

In February, Dung cut targets for credit growth and the budget deficit, as part of monetary and fiscal policy tightening to revive investor confidence in the Southeast Asian economy. The central bank raised interest rates every month this year through May to tackle price increases.

Liquidity at banks has improved, Nguyen Xuan Phuc, chair of the government office, said at a regular briefing in Hanoi today. Vietnam will cut interest rates in line with inflation, Phuc said. "Credit will be controlled closely with loans prioritised for production, agriculture and exports," he said.

Vietnam's foreign reserves rose by $3 billion in the first half of the year, Phuc said. The country's foreign exchange and gold markets have been stable, he said.

Dung reiterated that the government is targeting end of the year inflation of 15 percent to 17 percent in today's statement. Consumer prices climbed 20.82 percent in June from a year earlier, the fastest pace since November 2008.

Bloomberg - July 1st, 2011