Central bank urged to take proactive policy measures

At a Cabinet meeting in Hanoi on Wednesday (03 June 2009), the Ministries of Planning-Investment and Finance proposed a couple of measures for coping with the existing difficulties despite initial signs of the economy recovering.

They said the State Bank of Vietnam should find ways to stabilize the prime rate, lower interest rates for deposits by commercial banks at the central bank, increase compulsory foreign reserves, and limit credit growth in the banking system to below 30%.

The trading band for Vietnamese dong should be kept unchanged at 5% on either side, according to the two ministries. This means the narrow band will give little room for the dong to further fall against the U.S. dollar.

It is now common that banks’ corporate clients are holding on to their dollar funds in accounts in anticipation of a further drop of dong while importers are struggling to find sufficient dollars to make payments.

The Ministry of Finance said there were signs that the economy would be able to recover toward the year-end, so imports of materials and equipment could revive, thus fueling a rise in demand for dollars.

In the meantime, a recovery of export is not yet in sight while disbursement of foreign investment capital remains limited, thereby putting the pressure on how to balance foreign currency supply and demand in months to come, said the ministry.