Vietnam will raise electricity prices by a record 15 percent next month and economists warn the move could make it even harder to curb surging inflation.
Vietnamese Prime Minister Nguyen Tan Dung has approved the increase to start from Tuesday next week, when the average price will rise to 1,242 dong (US$0.06) per kilowatt hour from 1,077 dong, the Labor newspaper quoted Vietnamese Vice Minister of Industry and Trade Hoang Quoc Vuong as saying.
Vuong portrayed it as the lowest possible hike the government could implement, downplaying its impact on inflation and people’s living standards. The Ministry of Industry and Trade asked that prices be increased by 18 to 30 percent.
Economist Pham Chi Lan said the increase was the biggest ever and would make it difficult for the government to curb rising inflation, which is already around 12 percent.
“This high electricity price hike coupled with the recent devaluation of the local currency and the possibility of a gasoline price increase will make it very difficult for the government to realize the goal of stabilizing the macro economy and curbing inflation under 7 percent,” Lan said.
Earlier this month, the central bank devalued the dong by 8.5 percent against the US dollar.
Electricity of Vietnam, or EVN, the state-owned utility monopoly, has said it’s operating at a loss and the current price would make it difficult to attract foreign investors needed to build new power plants to keep up with booming demand. Vietnam’s demand for electricity is projected to grow 16 percent per year.
However, Lan said EVN should cut costs first before asking the government to raise electricity prices.
“Every time when they are faced with a loss, they ask the government to raise the price,” she said, adding that the company is not transparent about its own costs and losses.
Lan said the increase will affect people’s livelihoods, particularly the poor and it will also increase the cost of doing business.
Vietnam’s inflation hit 11.75 percent last year while the consumer price index last month rose 12.2 percent from the year before.
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