In the face of a rapidly increasing market exchange rate, the State Bank of Vietnam (SBV) has implemented a roadmap to control foreign currency lending in four directions.
The central rate announced by SBV recently broke the peak. If excluding objective factors affecting from abroad, the cause of this was from domestic factors. The most outstanding was the trade deficit cycle showing signs of returning.
Historically, from 2011 onwards, Vietnam had been continuously in a state of trade deficit. Since 2011 until the end of last year, this balance had reversed to surplus.
However, according to economic expert Le Xuan Nghia, in the last 8 years, the surplus of trade balance still had four quarters of deficit, particularly in 2018, it contributed two quarters of the third and fourth quarter. This trend continued to 2019 when the export of the first quarter was not very positive and the export prospect of the second quarter might decrease.
“While the US-China trade war is still escalating, the risk of a currency war is hidden, trade officials are showing signs of weakening and deficit. This is the problem of exchange rate impact,” Nghia said.
In fact, in the week from May 20-24, the exchange rate of USD/VND increased sharply to 80 dong per US dollar on banks and 90 dong per US dollar in the free market. Central exchange rate also increased by 12 dong per US dollar. In general, from the beginning of May, the USD/VND exchange rate rose by 0.8%.
In the context of tension in the exchange rate and further pressure, the dong will weaken. Following the situation of holding foreign currency, the phenomenon of dollarisation is increasing.
Therefore, to carry out the government’s policy of step by step limiting the dollarisation in the economy, to solve difficulties for business activities of export enterprises, to reduce borrowing costs and increase competitiveness for Vietnamese exports globally, SBV has implemented a roadmap to control foreign currency lending in four directions.
Firstly, there is no time limit for the demand for short-term loan capital to meet the needs of implementing export production and trading plans where the borrowers have enough foreign currency from export revenue to repay.
Secondly, continue to provide short-term loans to pay for the import of goods and services to serve the production and trading of export goods that borrowers have sufficient foreign currency from business revenues to repay loans.
Thirdly, stop short-term loans to pay for imports of goods and services in order to carry out production and trading plan to serve domestic demand when borrowers have sufficient foreign currency from business revenues to repay loans from after March 31, 2019.
Fourthly, make medium and long-term loans to pay for the import of goods and services when borrowers have sufficient foreign currency from business revenues to repay loans until the end of September 30, 2019.
