On October 22, 2020, within the framework of the IMF/WB Annual Meetings 2020, a Roundtable Meeting between the IMF Managing Director Kristalina Georgieva and ASEAN Finance Ministers and Central Bank Governors was organized virtually. Deputy Governor Nguyen Thi Hong of the State Bank of Vietnam (SBV) attended and delivered a speech at this Meeting in the role of ASEAN Chair.
This Meeting was aimed to discuss the Integrated Policy Framework (IPF) of the IMF. The IPF has been developed to help countries, especially emerging and developing ones, to come up with appropriate policy responses to the economic shocks on the basis of a combination of the policy instruments, including monetary policy, the exchange rate policy (including foreign exchange interventions), the macro safety and capital flow management. Currently, the IMF is reviewing the role of fiscal policies in the policy toolkit in response to crises, emphasizing the coordination and complementarity between fiscal policies and the monetary policy.
Speaking at the Meeting, the SBV Deputy Governor welcomed and spoke highly of the IPF as a tool to help countries identify and build optimal policy responses to adverse shocks based on the specific conditions of each country. In the context of the ongoing Covid-19 pandemic and with no signs of its slowing down, the discussions and review of the combination of the macro policies in order to find the optimal policy combination are of great importance to countries, especially the central banks. The SBV Deputy Governor emphasized that the synchronous combination of fiscal policies and the monetary policy instruments plays an important role, both in coping with the crises and in strengthening the economic foundation, accelerating the process of post-crisis economic recovery. This combination becomes even more important in a small developing economy with large openness like Vietnam.
Overview of the Meeting from Hanoi
However, the SBV Deputy Governor also mentioned that the integration of fiscal policies into the policy toolkit in response to crises should pay attention to fiscal consolidation and debt sustainability. The implementation of fiscal support solutions should be conducted in parallel with the consolidation of the fiscal room without increasing the debt burden. Besides, the international cooperation should be strengthened through consultations, policy dialogues between countries and international financial institutions such as the IMF and through other forums. This internal and external coordination mechanism will promote the cooperation and coordination between the IMF and the member countries and regions in this area, playing an important role, helping to create a resonance effect, contributing to the efficiency of the combination between fiscal policies and the monetary policy as well as other policy tools in the IPF, thereby helping the member economies to respond better to crises.
Finally, the SBV Deputy Governor said that the pandemic would create profound changes in the global economy, including the development of the digital economy, the contactless economy and non-cash payments. The development of virtual/digital currencies is an increasingly clear trend, creating new opportunities and also posing new issues and challenges for the economies, for the administration of the monetary policy, the management, inspection and supervision of the financial system. The SBV Deputy Governor proposed that the IMF continue to accompany and support ASEAN countries in enhancing the policy tools, improving the management and inspection frameworks in this new context.
Le Hang