Cash crunch prompts fire sales at large firms

"Companies have been facing cashflow challenges due to credit policy inconsistencies," he told the National Assembly Standing Committee at a meeting, adding that many were selling to foreign buyers.

He also said his ministry had warned of this risk many times before.

Credit growth in the Vietnamese economy was only 2.66% from the beginning of the year until April 24, which showed that manufacturing and doing business in general were difficult, he said.

He added that loan interest remained high at an average of 9.56% a year.

National Assembly Deputy Chairman Tran Quang Phuong also said that many business leaders have told him that they were facing financial challenges as their savings had been drained by two years of Covid-19.

A report by the Assembly’s Economic Committee also showed that rising loan interest rates and declining business profits were also part of companies’ struggles this year.

"Mobilizing cash through issuing shares and bonds was difficult, which reduced the capital needed to boost the economy," said committee head Vu Hong Thanh.

If the situation persists, bad debts will rise and financial resources at commercial banks will dwindle.

The average bad debt ratio in the banking system was at 2.88% by the end of March, compared to 2.05% at the end of December.

"We need to bring down policy rates to support growth as inflation and currency exchange pressures are no longer as intense as they were at the end of last year," Thanh added.

Phuong said the government needs to further analyze the property sector, the corporate bond market and the banking sector’s demonstrated inability to manage issues in those areas.

Lawmaker Nguyen Thi Thanh said that the "fear of being responsible" is spreading among local authorities, which has lead to delays in approving local projects.

Minister Dung said that Ho Chi Minh City used to approve an average of 70 property projects each year, but only eight projects had been greenlit over the last two years.

Many administrative procedures have also begun to take up to one or two years to complete, exhibiting a lack of enthusiasm among officials whose job it is to get things done, he added.

"The ministry has tasked a unit with reviewing procedures to see which government bodies are stalling economic activities," Dung said.