In the first 6 months, the State bank of Vietnam (SBV) has always kept a close watch on the movement of international and domestic economies and monetary market, managed monetary policies in harmony in order to ensure the balance of usable capital of commercials banks, stabilize currency, exchange rate and interest.
Policies go along reality
In international market after over two years, USD has depreciated against other hard currencies. Since mid January 2004, USD had shown slight recovery but it was still instable and fluctuated. USD has been up 4.3% against EUR and around 1-3% against Asian currencies. Low interest in international market has helped stabilize domestic interest ground, mean while, creating interest gap between USD and VND profitable to investors and supporting stabilize VND exchange rate. Gold price in the world market as from end of 2003 till beginning months of 2004 has changed complicatedly with wide range of increase and decrease, which has influenced to domestic gold market.
As reported by SBV, in the first 6 months, SBV’s management of money supply and monetary policies has secured the balance of usable capital of commercial banks and stabilized currency, exchange rate and interest. Number of traded sessions and traded volume of each session on SBV’s open market has more and more increased, giving positive impact to balance of commercials banks’ usable capital then influencing the balance of capital supply-demand and stabilizing interest on market. In the context of continuous rise of CPI at high rate which is exceeding the target set forth by the National Assembly, SBV has still maintained its policy of stable interest at 7.5%/annual (0.625%/month). Recently, SBV has tightened monetary policy via rising compulsory reserve interest applicable to credit institutions forcing them not increase USD saving interest. In the first 6 months, there was no big change in exchange rate between VND and USD, interbank rate was up 0.45% against one at end of 2003. Exchange rate on free market was up 0.2%. Basically, the exchange rate in the past time has upholden advantages of export activities without giving difficulties to import ones.
Growth of capital in the 6 months was lower than the rates of same period in the last two years (estimated up 8.28% against end of 2003), of which, capital in foreign currencies tended to be more than in VND. The reason was high CPI making actual interest of VND deposits decrease, together with expectation on interest, for which people prefer to make deposits in foreign currencies to in VND. Governor of SBV has issued several directives on raising credit quality, securing credit activities aiming at stabilization of monetary market, maintain of annual credit growth not exceeding 25% as planned, meanwhile limiting the move from VND to foreign currencies.
Solutions in the last 6 months
SBV’s Governor Le Duc Thuy said, SBV’s viewpoint in management of monetary market in the last months is to implement monetary policies more flexibly and cautiously and closely control currency in order to stabilize currency, interest and control inflation. In case of inflation comes out of control, SBV will apply promptly monetary tightening measures to stabilize macro economy for sustainable development.
SBV has warned credit institutions to limit the increase of assets and implement the principles of safe and effective credit./.
The Ministry of Finance - (03/08/2004)