Finance Minister Ho Duc Phoc recently spoke the National Assembly about this interest rate support package. He said: “We are advising the Government on a stimulus package through interest rate support worth about VND 20,000 billion per year or about VND 40,000 billion in two years."

Finance Minister Ho Duc Phoc.

He said that through this program, about VND 1 quadrillion will be pumped into the economy, to create jobs, increase output and reduce budget overspending in the coming years.

The information about the demand stimulus package has created mixed opinions of National Assembly deputies.

Deputy Vu Tien Loc of Hanoi said: "I welcome the policy of forming a 2-3% interest rate support fund as well as the 10-fold increase of the interest rate support fund as proposed by the Ministry of Finance". Loc suggested taking public investment capital to supplement the interest rate support fund and said that there is not much room for monetary policy to support businesses.

Deputy Tran Hoang Ngan of HCM City said that to achieve economic growth of 6-6.5% next year, it is necessary to mobilize more than VND3 quadrillion of social investment capital, including nearly VND2 quadrillion from the people.

“We must have an interest rate support package for businesses and support 2-3% for outstanding loans worth VND1-2 quadrillion. If this policy is implemented in two years, we need VND40,000-60,000 billion, which can come from unallocated public investment,” Ngan said.

Deputy Ha Sy Dong of Quang Tri province said that only the interest rate support package is feasible, because if capital-hungry businesses can access cheap capital, with interest rate of 2% to 3% less than commercial loans, which stands at 6%-10% at present, there will be motivation to restore production and business.

Deputy Hoang Van Cuong of Hanoi said that it is necessary to have a policy to provide interest rate compensation so that businesses can borrow capital at an interest rate equivalent to the inflation rate. However, he noted that there must be a control mechanism so that all businesses that need capital for production and business can have access to cheap loans.

Deputy Tran Thi Van of Bac Ninh province said that if this support package is launched, it is necessary to learn lessons from the 4% interest rate support package worth up to $1 billion that was given after the crisis in 2009. This package caused bad debts for the banking system, which were solved only after the National Assembly issued Resolution 42 on dealing with bad debts many years later.

She suggested having a working group to help the Prime Minister monitor the implementation of the support packages to ensure that they are implemented effectively and for the right purpose.

Deputy Pham Duc An of Hanoi said that the State's support for businesses through interest rate support needs to be calculated appropriately. If the State budget supports about VND3,000 billion in interest, commercial banks have to disburse VND100,000 billion. The risk of capital loss will be huge for commercial banks.

Finance Minister Ho Duc Phoc explained that for the interest rate support package worth $1 billion that caused bad debts in 2009, the Government gave widespread support, even supporting businesses with bad debts. Moreover, the banking system at that time had a high rate of bad debt and kept the same group of debts according to Decision 780 of the State Bank of Vietnam.

He said that based on experiences from the $1 billion package, subjects benefiting from the interest rate support package will be those who have the ability to invest and add value to the economy, especially borrowers without bad debts.

Tu Hoang

VND1 quadrillion package for economy via interest-rate subsidy proposed

The Ministry of Finance has advised the Government to launch a demand stimulus package through an interest-rate subsidy, worth VND20 trillion a year and VND40 trillion for two years.