An economic expert of the National Assembly described the State Bank of Vietnam’s recent adjustments in foreign exchange and interest rates as urgent, essential, and proper moves.

Vu Viet Ngoan, Vice Chairman of the National Assembly’s Economic Committee, talked with the Vietnam News Agency on the matter on the sidelines of an international seminar on “Growth quality of Vietnam’s economy” in Hanoi on Feb. 24.

Ngoan noted that Vietnam was facing the threat of soaring inflation.

According to him, the foreign exchange rate had been in a state of imbalance for a long time and that fact led to a shortfall in the balance of payments and a high trade deficit.

Ngoan noted that prices of foreign currencies on the black market were much higher than that offered by banks.

To cool the economy down, with top priority given to stabilising the macro-economy and constraining inflation, required the Government to tighten fiscal and monetary policy, Ngoan explained.

That move aimed to contract the economy’s demand, credits, money supply and public expenditure, he said.

“The tightened fiscal and monetary policy must continue in the immediate run until the market signals signs of stability again and the growth speed of the consumer price index slows down,” Ngoan stressed.

On the tightened monetary policy impacts on businesses, Ngoan said a high interest rate for loans made businesses which were not strong financially think twice about their investments. They may cut or temporarily postpone invested projects, thus helping the economy cool down.

The official, however, raised the need to screen all activities of banks, including their expenditure, to reduce the level of spending for loans./.