The New Nation - Internet Edition

AFP, Hanoi

The State Bank of Vietnam said yesterday it will lower its benchmark interest rate from 10 to 8.5 percent from Monday to help businesses overcome the tough economic climate. It will also help expand credit for production, imports and exports of essential goods, while small and medium sized enterprises, including those in the real estate business, will "be able to settle their due debts", the bank said in a statement on its website. Earlier this year, the bank raised its benchmark rate several times, from 8.25 percent to 14 percent, to fight double- digit inflation. Then in late October it started cutting rates again to free up credit. Vietnam, a major exporter of manufactured goods such as clothing and footwear and commodities including rice, coffee and seafood, has already been hit by downturns in the United States, Europe and other markets. Inflation has started to ease, falling to 24.2 percent year- on-year in November after having topped 28 percent in August. Communist Vietnam is aiming at economic growth of around 6.5 percent this year and next year, down from 8.5 percent in 2007. According to Friday's statement, the bank will cut the refinancing rate to 9.5 percent from 11 percent and the discount rate by 1.5 percent to 7.5 percent.

Overnight interest rates for payments on the inter-bank market will be reduced to 9.5 percent from 11 percent.