UPDATE 1-Vietnam Jan-May loans rise faster, cuts foreign debt

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By Ho Binh Minh

HANOI, May 30 (Reuters) - Vietnam's outstanding loans at the end of May will rise 18.4 percent from the end of 2007, accelerating from a 13.4 percent growth at the same period last year, the central bank's governor said on Friday.

However, he said monthly credit growth was on a slowing trend following monetary tightening measures as the Communist Party government battles to tame seven consecutive months of double-digit inflation.

In remarks to the one-party National Assembly broadcast live on state-run Vietnam Television, central bank Governor Nguyen Van Giau did not give any lending value but said lending growth in May compared with April would slow to 2.25 percent.

It rose 3.36 percent between March and April and 3.78 percent in March from February.

Inflation has emerged as the developing economy's biggest challenge, hitting an annual rate of 25.2 percent in May, the second-worst in Asia.

Finance Minister Vu Van Ninh told the legislators that foreign debt accounted for 29 percent of gross domestic product last year, lower than the 30.3 percent estimated last October.

Last year, Vietnam's GDP rose 8.5 percent to $71 billion. Its foreign debt rate stood at 37.3 percent at the end of 2006, according to the Finance Ministry report.