Rates won’t rise with rice and paper

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April 30 – Drastic increases in the prices of raw commodities are not enough to prompt a rise in interest rates, as Vietnam’s central bank reports that its anti-inflation measures are proving effective.

Although consumer prices are up 22 percent this month over last year at the same time, the bank is confident that its previous rate raise, to a current level of 8.75 percent, as well as increased bank reserves and compulsory bills sold will be enough to combat the inflation that plagues Vietnam.

As proof, Governor Nguyen Van Giau points to month-on-month inflation as a benchmark, rather than comparing gains from the year previous. While February to March saw a rise of 3 percent in consumer prices, they rose only 2.2 percent from March to April.

This news is of little comfort to Vietnamese paper-goods companies, who are forced to dramatically mark up the cost of their goods in response to spiraling paper prices. Ho Chi Minh City notebook producers will be charging at least five percent more for their goods next month when the new school year begins, while Vinh Tien Paper Joint Stock Company’s Marketing Director, Nguyen Minh Trung reported two increases in his company’s notebook prices last month, 9 percent in both cases. Paper business across Vietnam are facing the difficult decision of offsetting spiraling input costs with higher prices, and the risk of losing customers as a result.

Meanwhile, an even more essential commodity, rice, has soared in price to the extent that the mayor of Ho Chi Minh City recently visited a rice outlet to verify the panic caused by speculating rice distributors. Rice in HCMC now costs US$1.25 per kilo, $0.28 higher than just two days ago. The continuing hike comes in anticipation of rice shortages and rising prices around the globe. The mayor, Nguyen Thanh Tai, has enlisted inspectors at the Tran Canh Chieu Market, a major rice outlet, to prevent hoarding. Although the government continues to assure its people that there will be no rice shortages, rice wholesalers are refusing orders of more than one ton to curb speculation.

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