High-value banknote at blame for inflation: Vietcombank

Explaining why the inflation rate this year spiked to over 7% in the first half, one official from Vietcombank went out on a limb commenting that it could also be attributed to the issuance of new high face banknotes of 500,000 dong in December last year.

Addressing the impact of inflation in Vietnam at a recent meeting held by Vietcombank, one banker said that in addition to fundamental changes in goods supply and demand relation and high increases in world prices of some key goods, the new 500,000 dong notes is also a mitigating factor.

As analysed by Vietcombank, the dong is still tending weaken however, the rate depends on the target set by the State Bank of Vietnam and the strength of the US dollar. Since the start of this year, the dong has weakened about 0.5% or around 1% annually against 1.6% in 2002 and 2.1% in 2003

By the end of April, 2004, national exports reached US$9.54 billion, while import spending was US$11.5 billion. According to Vietcombank, the dong devaluation is mainly attributed to trade deficit and inflation.

Vietcombank said compared with late 2003, there is not much fluctuation of the forex rate between dong and US dollar in the domestic market. Namely, the average inter-bank forex rate increased by 0.45% and the forex rate in the free market was up by 0.2%. To avoid forex risks in international trade, the most effective measure is for customers to use options with banks.

Since early this year, foreign currency trade payments of Vietcombank is estimated at US$5.65 billion, up by US$583 million against last year of which foreign currency selling reached US$2.813 million, a rise of 14.7%.

 

Category: Finance