"Hanging rice" on the day of crop failure

A former bank president who has worked in the financial market for thirty years and is now retired shared with me a prominent problem today: There are almost no customers who are qualified to borrow capital, so it is very difficult for banks to disburse. Some banks have had outstanding credit growth since the beginning of the year, mainly to "pour money" to save "backyard" companies.

He added that interest rates have decreased and may continue to decrease, but money will still be difficult to get out.

On the website of a joint stock bank that is considered to be safe, the six-month savings interest rate is only 6.9%/year, and 12-month savings interest rate is 7%/year. Data released by the State Bank up to the end of the first quarter shows that the ratio of outstanding loans to total deposits in the entire system is at 75.2%, an unprecedented low in decades. That means that for every VND10 mobilized, banks lend an average of only VND7.5.

It is not that banks do not want to lend, but they are afraid of lending and not being able to recover. Good businesses lack export orders, domestic products are slow to sell, and profits are shrinking. Businesses that want to borrow and are willing to borrow at any interest rate are mainly in the construction and real estate sectors. People's, society's, and banks' money is stuck in real estate worth millions of billions of dong, stagnant and illiquid. If we lend more to real estate, when will we get it back?

Interest rates have decreased, but people's deposits in banks have increased, reaching an absolute amount of 6.28 million billion VND at the end of the first quarter, an increase of 7.08% compared to December last year. When lending is difficult, commercial banks should have lowered interest rates quickly and strongly, but interest rates have decreased quite slowly. The reason is that after the Tan Hoang Minh, Van Thinh Phat, SCB cases, every bank has tried to thicken its liquidity cushion. Some banks have "accidentally" been involved in corporate bonds, and have no choice but to roll over the bonds that are due.

People have saved a lot. But the total deposits of people and businesses only reached 11.94 quadrillion VND due to a sharp decrease in business deposits, while the total outstanding debt of the economy was 12.23 quadrillion VND. Supplementing the deposits are valuable papers issued by banks, borrowed on the interbank market and nearly half a quadrillion VND that the State Treasury has not used, deposited at four state-owned and semi-state-owned credit institutions.

More importantly, the State Bank has continuously pumped money into circulation through refinancing, buying back valuable papers (such as government bonds) and buying back foreign currency from exporters. A senior State Bank official said that the agency has bought more than 7 billion USD in the past few months, bringing about 162,000 billion VND to the market. Not to mention that in the first quarter, the monetary policy management agency increased the money supply by about 200,000 billion VND.

Obviously, the economy does not lack money. What is fundamentally lacking and has been lacking for many years now is the ability to absorb capital, use capital in the right place, for the right purpose to bring high efficiency. Not only that, the cash flow is unbalanced on a national level.

An example of the cash flow imbalance is that one million billion VND of public investment is being "locked" in the warehouse, unable to be disbursed. The Ministry of Finance explained that among that one million billion VND, there are budget items that have been allocated and listed but not yet spent, and cannot be "spent indiscriminately". That is true. However, flexibility in budget coordination to make the most of the capital strength of the national treasury management agency is necessary at this time. Immobile money is "dead" money. One million billion VND "locked" and only enjoying an interest rate of 0.8%/year is an unacceptable waste when the country is in debt. Even an ordinary citizen can calculate and divide the money in their pocket into two or three items to spend in the most beneficial way.

In the context of declining global economic aggregate demand, high external inflation and interest rates in Europe, the US and Australia only temporarily stopping at the top rungs, hoping that Vietnam's interest rates will decrease further is unrealistic.

Looking at it from a broader perspective, that one million billion VND is like a "hanging rice" amount during the harvest season. This one million billion VND obtained from issuing government bonds has been included in the public debt ceiling and Vietnam's public debt ceiling is under control. There is no obstacle for that huge amount of money to the public debt ceiling.

We have money, a lot of money. The imbalanced cash flow can be straightened and adjusted. The most important thing is which ministry, branch, or locality will fire the starting gun and personally untie the bottlenecks to unblock the cash flow. Spending money in the right place and at the right time is the responsibility and obligation to the country and the people at this time.

According to VnExpress