Keeping the consumer price index to below 7 per cent will prove difficult, said Nguyen Tien Thoa, director of the Pricing Management Department, Ministry of Finance, in an interview with Thoi bao Kinh te (Vietnam Economic Times) newspaper.
How do you think the hike in electricity prices will affect inflation in Viet Namthis year?
The hike will increase energy tariffs by 162 dong per kWh. Of course, the price hike will cause production costs to increase. However, losses will depend largely on producers' management skills and their efficient utilisation of energy during their production processes.
For poor households, they still have access to State subsidies for the first 50 kWh they use domestically.
Technically speaking, the rise in electricity prices will cause direct increases in CPI of about 0.38 per cent during the first quarter. Yet during the second quarter, psychological factors may cause the CPI to double.
Some people have expressed their concerns that the 9.3 per cent increase in the exchange rate between the US dollar and the Vietnamese dong would cause commodity prices to increase. What do you think of the State Bank of Viet Nam's decision?
The decision has impacted the price of imported goods that are sold on the domestic market and exports.
The increase in the exchange rate has become a catalyst for export momentum. As a result, prices have increased. But the assumption that if the dong is devalued by 1 per cent, then inflation will increase by 0.1 per cent is not always true.
Some enterprises buy US dollars from commercial banks at VND19,500 for $1, but with the new exchange rate they have to pay an additional VND1,400 for $1. In fact, many of them have already been paying for this new exchange rate for quite sometime on the black market.
In my opinion, it's important for enterprises to look for measures to limit the impact of the foreign exchange adjustment.
On the other hand, the Government should be able to detect and identify people who have abused the SBV's decision and have profited from the devaluation. It is high time for relevant agencies to step up their monitoring activities and get the situation under their control.
The increase in the price of crude oil on the world market has impacted the price of petrol and diesel in Viet Nam, right?
Under Decree No 84/2009/ND-CP, the price of petrol and diesel is market based, but the sector is still managed by the Government. The Government only aims to stabilise the price, not to fix a certain price.
With our management, we don't want to introduce any measures that may shock the population. We just want them to share with the Government some difficulties. For example, we have reduced the import taxes levied on petrol and gas to 0. So if the price of crude oil rises on the international market, we want people to understand that the State subsidy policy is not used anymore and we are willing to let the market decide the price. It's also meant to prevent people from smuggling petrol or diesel in from neighbouring countries.
So it will not be easy to have CPI drop below 7 per cent this year?
Yes, it will be difficult to achieve this target. There are different factors that have made the target unfeasible.
To be able to put a cap on the inflation rate at a rational level, it is imperative to carry out several measures that were described in Resolution No 02/NQ-CP.
There are two things we have to do now. First, we have to restructure our economy and change the growth rate model, which is based on efficiency and high competitiveness.
In the meantime, we have to introduce measures to control the demand by reducing credit growth, decrease public overspending and lower the deficit between exports and imports. These objectives are reflected in the National Assembly's targets set for the country in 2011.
We have to introduce economic measures that would make the gold market, the foreign exchange rate, foreign currencies and interest rates stable. And finally, we need to manage the inflation rate. — VNS