MOF has denied that it has to borrow SBV’s money because of a state budget shortfall, and that it is impossible to borrow money from other sources.

MOF’s Deputy Minister Huynh Quang Hai said on national television VTV that the borrowing was a normal operation carried out by the State Treasury.

Citing the state budget law and state bank law, said that in case the state budget has a temporary deficit, the state can borrow money from SBV and pay the money back within the fiscal year.

Hai also said that the borrowing would not affect monetary and interest rate policies.

Deputy Governor of the State Bank Nguyen Thi Hong said the bank is considering the proposal. 

However, like Hai, Hong affirmed that the lending is not prohibited by law. 

She has also reassured the public, saying that if SBV agrees to lend money, it will apply necessary measures to ensure that monetary policy is strictly followed.

However, a reader commented that he could not understand why MOF still needs to borrow money from SBV if MOF has fulfilled 59.5 percent of the yearly tax collection in the first seven months of the year.

MOF’s representative also said that with the tax collection, MOF would be able to curb the budget deficit at 5 percent, as decided by the National Assembly.

The deputy chair of the National Assembly’s Economics Committee, Nguyen Duc Kien, said in Thanh Nien newspaper that MOF has the right to borrow money from different sources, including the State Bank, to cover the state’s expenses, but it has to give detailed explanations about how long it borrows, what it is for and how the loan would be disbursed.

“It would be safe if MOF borrows money for one year at maximum. But if it borrows for a long time, this will affect the State Bank’s monetary policy management,” he warned.

According to Thoi bao Kinh Te Sai Gon, the State budget used to borrow US$1 billion from the SBV’s foreign reserves to subsidize interest rates and stimulate aggregate demand in 2009. The loan, according to the World Bank, worsened the real estate bubble, caused inflation to surge and led to macroeconomic instability in 2010.

Meanwhile, deputy chair of the National Finance Supervision Council Truong Van Phuoc commented that MOF needs to be cautious when borrowing money or issuing bonds to pay old debts.

He also said the sustainable state budget balance can only be created by practicing thrift and reducing expenditures.

CV