Avoid market panic, keep monetary policy flexible: central bank told

The State Bank of Vietnam (SBV) has been asked to keep its monetary policy flexible from now until the year-end, avoiding dramatic moves that may trigger panic in the market.

The government made the request of the central bank following a regular cabinet meeting earlier this month. The SBV was also requested to manage the forex rate properly in line with market movements, contributing to inflation control and macroeconomic stability.

Meanwhile, the mid-point exchange rate set by the SBV slid VND10 from a day earlier to VND24,074 per U.S. dollar on Friday, lower than the VND24,088 on September 28.

Commercial banks lowered their quotes Friday by VND40 to VND24,245-24,585 for bids and asks at Vietcombank and VND24,240-24,550 at Eximbank, 3.7% higher than that in early 2023.

Amid ample liquidity, the SBV has withdrawn a total of VND140.7 trillion ($5.8 billion) from the economy in the last 12 days via selling treasury bills.

Analysts have hailed the bank’s consecutive withdrawals, which were aimed at slowing down the dong’s depreciation without tapping its forex reserves. In 2022, the regulator had to sell some $25 billion in hard currency to keep the forex rate stable.

The government has also asked the SBV to widen businesses’ credit access and quicken the deployment of several soft loan packages, including VND40 trillion ($1.65 billion) in subsidized interest rates, VND120 trillion in credit for social housing, and VND15 trillion in loans for companies processing forestry and seafood products.

Credit growth accelerated in the last week of September, reaching 6.92% as of September 29 compared to end-2022, up from 5.91% as of September 21.

The banking regulator has cut policy rates four times since the start of this year. Deposit interest rates have dropped to the lows seen during the Covid-19 pandemic. Lending rates are also decreasing but a slower pace, to 7.9% per year on average for new loans.