SBV not to devaluate Vietnam dong: Governor

VNStockNews.com - The State Bank of Viet Nam (SBV) will not depreciate Vietnam dong against the U.S. dollar as this may not help reduce the trade deficit but will put more pressure on foreign debts of the country, governor Nguyen Van Giau told Viet Nam Net on Thursday.

Giau said that the current exchange rate between Viet Nam dong and the U.S. dollar remains reasonable as inflation is under control and the dollar has depreciated against other currencies, especially those of countries with export mechanisms similar to Vietnam’s.

Many local exporters have refused to sell dollars to commercial banks given the impacts of the global financial crisis. The tense U.S. dollar situation has become serious as banks are short of greenbacks to balance the economy, Giau said.

The Government’s subsidized interest policy has cut lending rates of Vietnam dong loans to only 5% or 6% per year. As a result, some enterprises have borrowed dong credits and hold on to dollars to earn profits from the exchange rate difference.

However, SBV will not sell dollars to ease the greenback shortage on the market. While choosing measures to control the currency market, the central bank must ensure the balance of international payments as Vietnam has suffered trade deficit for the past 23 years, Giau explained.

If enterprises have easy dollars, they may increase import activities, even unnecessary products that will adversely impact domestic production and raise the national trade deficit. Although some companies have complained about the dollar shortage, SBV has to consider benefits for the economy while implementing a policy, Giau said.

The banking system will ensure sufficient currency supplies for enterprises to import necessary commodities to maintain production. The central bank is mulling over measures to support enterprises after the interest rate subsidy program is over and to reduce the side impacts on the currency market.

Commercial banks have agreed to slash U.S. dollar lending rates to 3% to 3.5% per year to help enterprises reach the credits. Otherwise, they can choose other currencies as alternatives, such as Japanese yen in trading with Japanese partners, he said.

However, macro policies need time to bring about clear impacts, especially currency polices that will effect enterprises, the banking industry and the whole economy, Giau added.