The PM: value of dong should be stabilised in 2017

31-Dec-2016 Intellasia | BizLive | 6:00 AM Print This Post

Speaking at the government’s conference with leaders of localities in the morning of December 29th, Governor of the State Bank of Vietnam (SBV) Le Minh Hung said that the exchange rate and monetary policies have been kept stable in 2016. Since early 2016, the banking sector has been under a huge pressure in operating interest rate level because the growth target in 2016 was set very high and the needs for medium and long-term investment capital increase. Meanwhile, the issuance of government bonds has become larger in volume, with longer tenors.

Despite being under great pressure, SBV’s Governor said that the average lending rate has fallen by 0.5-one percent per annum as of late 2016. Governor Hung added that this is the effort of the banking sector in macroeconomic management and in supporting enterprises.

SBV’s leader also said that as the monetary and exchange rate policies have stably been managed, the confidence in dong, particularly of foreign investors has been strengthened. Although other currencies in the region depreciated and fluctuated strongly, the foreign currency market of Vietnam remained stable.

SBV’s Governor revealed that the dong, so far, has declined by about 1.1 to 1.2 percent in value, while the foreign currency liquidity on the market has been unfluctuating. He added that the intervention in the market of SBV this year is very modest, while it was very remarkable in the previous years.

In addition, the head of SBV said that the credit growth has been in line with the target to achieve 18.5 percent growth in the whole year, spread out over the months. The structure of lending has seen positive changes, focusing on priority areas and areas supporting the economy such as agriculture and export, while strict control has been applied to risky areas such as real estate sector right from the beginning of the year.

However, SBV’s Governor also admitted that there are many challenges and limitations such as the bad debt settlement issue or issue of legal framework, etc.

Regarding the orientation in 2017, the head of the banking sector acknowledged that since the global economy has more unpredictable factors, global trade is growing weakly, and many countries are implementing the policy to devalue local currencies to support exports, etc., the operating tasks in 2017, especially monetary operating, must be cautious and flexible.

Governor Hung also said that the pressure of interest rate increase will be great in 2017 due to the high growth objectives. Thus, the operating policies should be more variable, closely stick to the macro monetary balances, and striving to lower medium and long-term interest rate level as directed by the government.

Presenting proposals to the government, SBV’s Governor said that the rumours have had very negative impact on the macro economy and monetary policy. Thus, the agency proposes the Ministry of Public Security and Ministry of Information and Communication in the near future strengthen coordination to handle these types of problems, especially false rumours.

Moreover, Governor Hung suggested the Ministry of Agriculture and Rural Development to report to the government about the policy, orientation, and criteria regarding the high-tech agricultural investment, so that the SBV can request commercial banks to arrange capital.

After the report of SBV’s Governor, the prime minister commented that Hung is the youngest government minister but has a very good, active and tough management. Concerning the orientation for the banking sector in 2017, prime minister Nguyen Xuan Phuc required the monetary policy operating to closely follow the important goal which is to stabilise the value of dong at the best possible level.


Category: Finance, Vietnam

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