Govt adds fuel to already burning inflation

27 Feb '08

2 min read

The Government of Vietnam, on February 25, announced a rise in the prices of petrol and this has triggered large scale disappointment in the country which is already burdened by rising prices of goods in all sectors.

Besides, Government has also given petrol distributors the authority to have full control over the prices on a condition that it does not go beyond a certain limit.

Experts believe that the decision is entirely baseless since the economy is already threatened by rising inflation. Besides, there is a pressure from the country's consumers who complain of extremely high prices that makes essential goods unaffordable.

A likely consequence of the decision is an increase in the Consumer Price Index by 0.4-0.5 percent. However, industrial sources confirm that the outcome will be more extreme in its intensity than expected.

Apart from an obvious increase in transport fare which has already soared by 7-12 percent in Ho Chin Minh from January this year, there is bound to be a rise in the production costs of nearly all the commodities.

Impact of this will be seen even on the textile sector. Rising oil prices will accompany a hike in the prices of polyester which will in turn create a paucity of the fabric forcing manufacturers to indulge in cotton production.

Earlier, in 2006, oil prices decreased prompting the Ministry of Finance (MoF) to think of lowering the retail petrol price in the domestic market while at the same time maintaining the import tax rate at 15 percent. Presently, the situation has completely changed and if Government fails to reconsider its decision, Vietnam may have to suffer a set back in the domestic as well as international arena.

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