The State Bank of Vietnam (SBV), the country’s central bank, will continue to keep policy interest rates unchanged at present and in the coming time, affirmed its deputy governor Dao Minh Tu.
The SBV will facilitate interest rate cuts in line with prevailing macroeconomic contexts and inflation control needs, Tu said at an economic forum.
Noting that exchange rates were closely linked to interest rates, Tu emphasized keeping the latter low did not necessitate “sacrificing” the former.
Since early this year, the Vietnamese currency, the dong (VND), has depreciated 5.9% against the U.S. dollar. With SBV’s intervention, the pressure on the USD/VND exchange rate has eased, bringing down the depreciation to 4.8%.
Tu attributed this year’s USD/VND exchange rate increase to several factors, including the fight against high inflation by the U.S. and other major countries, uncertainty about the timing of rate cuts by the U.S. Federal Reserve (Fed), the impacts of falling global demand on Vietnam’s imports and exports, high sea shipping costs, and rallies in oil and gold prices amid tensions in the Middle East.
Alongside external influences, the USD/VND exchange rate has been affected by domestic factors like low interest rates, a resurgence in foreign currency speculation, heightened demand for foreign currency driven by import recovery, limited foreign currency supply due to weaker exports and high expectations, Tu added.
The SBV official drew attention to the fact that the central bank has managed to stabilize exchange rates by regulating the amount of money in circulation, managing interest rate prudently, encouraging export loans to bolster foreign currency supply, and appropriately managing the central exchange rate to deter foreign currency speculation by businesses and commercial banks.
It will promote forward and spot rate calculators to support businesses. If necessary, the central bank will sell foreign currency from the forex reserves as a way of intervention, Tu said
Credit growth had been negative in the first two months of this year because of low investment and consumption demand, but it rebounded in March with a growth rate of 1.5% compared to early this year, although this was lower than the 2% expansion recorded in the same period last year.
Since the beginning of the year, the SBV has applied 10 “drastic solutions” to support and enhance capital flow for businesses in particular and the economy as a whole. As of now, liquidity in the economy in general and within commercial banks in particular, remained ample, Tu said.