Vietnam should have independent central bank
Vietnam needs to set up an independent central bank to deploy monetary policies to stabilise prices and curb inflation, experts of the International Monetary Fund (IMF) have said.
The central bank as it is now needs more specific and independent tasks, said IMF senior economist Rina Bhattacharya at a seminar about policy challenges of Vietnam as the country is becoming a middle-income economy.
The seminar was held by IMF and the State Bank of Vietnam (SBV) in Hanoi this week.
"We find that the central bank has been pursuing multiple objectives that sometimes contradict one another," Bhattacharya told the seminar.
She cited Section 1, Article 4 of the 2010 State Bank Law that says the central bank's functions are to stabilise the domestic currency value, ensure the security and efficiency of the banking system as well as the payment system, and contribute to the socio-economic development with socialism orientation.
She said tackling inflation is not the sole objective of SBV, and sometimes the central bank was even obliged to help bolster economic growth. "This denotes a problem in macro-economic management in Vietnam," she said.
Moreover, she said, Vietnam's monetary policy lacks transparency and predictability, leaving a negative impact on interest rates, growth and inflation.
In addition, although the real interest rate tool has great effect on core inflation in Vietnam, it has yet to be fully utilised to fight inflation which is now the highest among developing countries in Asia.
IMF remarked that inflation reached its peak of 20.3 percent in the third quarter last year due to the loosened monetary policy. "Vietnam should aim at price stabilisation and inflation curbing as the main targets," Bhattacharya said.
SBV deputy governor Le Minh Hung did not mention the establishment of an independent central bank when delivering his speech at the seminar.
He said SBV would carry out its monetary policy based on targeted inflation in order to further stabilise the macro-economy and restrain inflation.
The deputy governor said SBV would closely follow market changes and macro-economic situations to regulate interest rates and forex rates in order to improve the efficiency and effectiveness of the monetary policy.
IMF's suggestion about setting up an independent central bank is not new. The organisation made the same recommendation in the late 1990s and the model has been discussed in Vietnam in several occasions.
At the Vietnam economic forum held by The Economist Magazine early this year, deputy prime minister Hoang Trung Hai said the government was considering whether to establish an independent central bank.
Tuoi Tre News - March 20, 2012