A clear mechanism is essential to ensuring a preferential credit package will benefit pandemic-hit firms and contribute to economic recovery.

Under the State Bank of Viet Nam’s draft, which was recently made public, loans of pandemic-hit firms will enjoy an interest rate cut of 2 per cent.

The package will total VND40 trillion sourced from the State budget, aiming to ease financial difficulties for enterprises, cooperatives and business households and recover business operations.

In 2009, the Vietnamese Government used a credit package worth VND17 trillion (equivalent to US$1 billion at that moment) sourced from the foreign exchange reserve to provide an interest rate cut of 4 per cent for businesses.

However, many banks had not managed to settle these loans, according to Nguyen Quoc Hung, General Secretary of the Viet Nam Banks Association.

Although the past package contributed to stimulating economic recovery, it also brought problems, Hung said, pointing out that after the package was implemented, the banking system faced big liquidity problems and rising bad debts.

“It is necessary to put the mechanism of the new preferential credit package under careful consideration to prevent similar problems,” Hung said.

Banking expert Can Van Luc said lessons learned from the past showed that the new package should have a clear and detailed implementation process.

Luc said that the 2009 package lacked a process, regulations and focus, resulting in several preferential loans being provided to high-risk sectors such as securities and real estate.

Tran Du Lich, member of the Prime Minister’s Economic Advisory Group, said that the preferential interest rate credit package was essential. It was also necessary to have a mechanism to direct preferential credit flows at targeted sectors and pandemic-hit firms to prevent distortions in the financial markets and bab debts.

Sectors and enterprises must be carefully selected, Lich stressed.

Deputy Governor of the State Bank of Viet Nam Dao Minh Tu said that the Ministry of Finance might be in charge of approving which enterprises would be provided with the preferential loans. — VNS