Vietnam looks to slash public spending

HANOI. Mar 31, 2011. Vietnam is expected to cut public investment by 50 trillion dong ($ 2.4 billion) or 7.4% this year, the central bank said Thursday, in its latest attempt to restore economic stability.

Prime Minister Nguyen Tan Dung, who met with state officials late Wednesday to review the implementation of anti-inflation measures announced last month, asked ministries, provinces and industries to reduce their investment capital in various projects, the central bank said in a statement posted on its website. By reducing investment levels, authorities are hoping to curb the amount of cash circulating in the economy, which in theory should cool growth and help bring inflation down.

Economist Vuong Quan Hoang from Hanoi-based DHVP Research & Consultancy said the government will find it very difficult to cut such a large amount of spending because many of the projects are run by groups with connections to government officials. “It’s not in interests of anyone to cut off the funding,” the economist said.

Via a series of tighter monetary and fiscal policies, the Vietnamese government hopes to tame inflation, which rose 13.89% in March from a year earlier, the fastest year-to-year pace since February 2009. The government wants to cap inflation at 7% this year.

The trade deficit also remains wide, coming in at $ 1.15 billion in March and $3.03 billion for the January-March period.

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