The country's prime interest rate should be cut from 9 percent to 8 percent to help enterprises gain access to loans more easily, the National Financial Advisory Committee said in their 11-month economic analysis.

This should be one of several drastic actions "bravely" taken by the Government soon, it said, pointing out three main arguments for an immediate rate cut.

Firstly, the interest rates of Government bonds tend to decline at the end of the year.

Secondly, inflation is being tightly controlled at below 8 percent, which means that there is little difference between deposit interest rates and inflation rates.

There is no risk of deposits being withdrawn from the banking system as well, as other investment channels including gold, securities and property are too tough at present.

Thirdly, exchange rates are stable and people no longer prioritise holding foreign currencies.

The committee said it supposed that interest rate cuts would not affect people depositing money at banks, citing that deposits have increased about 15 percent this year although mobilising interest rates have been slashed by 5 percent since the beginning of the year.

Government Office vice chairman Pham Viet Muon said the Government would look at falling consumer price indexes over the past months and hold a meeting this week to discuss interest rate adjustment.
He said that 7.5-8 percent would be an ideal mobilising rate for now and if these levels were reached, banks would be able to set lending rates at 10 percent.

The committee said interest reduction should be considered a prerequisite to helping enterprises solve difficulties. "The number of companies dissolving and halting their operations continued to increase in November and there is no sign that this will stop; firms are still facing challenges in all aspects," it said.

They added that sharply increasing costs of material, fuel and transportation are a major hindrance to business recovery. Enterprises have had to cope with high interest rates of over 15 percent for over 30 months, and their financial costs increased nearly 25 percent within the first quarter of the year, according to the committee's report.

While suggesting the nation control lending interests at no more than 150 percent of the prime interest rate, the committee said the Government should speed up its guarantees for bank loans to facilitate credit flow.

The committee said the national economy has escaped from the bottom zone but the momentum for recovery is still uncertain with a lack of driving forces to push up total demand.

It noted that inflation has been slowed down due to weak demand and firms’ lack of capacity to absorb capital, in addition to the Government's cautious policies.

As well as staying constant with the goals of controlling inflation and stabilising the economy, the Government needs to give clear messages to the people about banking restructuring and bad debt resolution, it said./.VNA