Foreign exchange reserves reach record high

08:14 | 17/05/2014 Economy

(VEN) - Thanks to flexible monetary policies from the State Bank of Vietnam (SBV), the market has remained stable and foreign exchange reserves have continuously increased in the recent times. Foreign exchange reserves have reached US$35 billion according to the SBV governor, the highest rate so far.

Vietnam’s foreign exchange reserves have reached US$35 billion

Exchange rate stability

Patiently pursuing flexible management policies, SBV has taken the initiative in maintaining the balance between the economy’s inflows and outflows of money. Thanks to these efforts, the foreign exchange rate has been stably maintained despite several hundred trillion dong having been spent to buy foreign currency. In the first quarter of 2014, the SBV bought US$7.7 billion to increase the country’s foreign exchange reserves. Continuous increases in foreign exchange reserves have improved Vietnam’s position in foreign trade transactions. More importantly, inflation and the foreign exchange rate remained stable despite the increased circulation of currency to cover the foreign currency purchase. At the regular press conference in April, SBV’s Monetary Policies Department Director Nguyen Thi Hong said, “In the first four months of this year, the SBV continued to buy foreign currencies to increase foreign exchange reserves.”

At a meeting between Prime Minister Nguyen Tan Dung and businesses in late April, SBV Governor Nguyen Van Binh confirmed that Vietnam’s foreign exchange reserves had reached a record US$35 billion. Governor Nguyen Van Binh also added that the SBV would continue to maintain flexible management to keep the inter-bank foreign exchange rate stable. The foreign exchange rate would remain stable and adjustments would be made within a maximum range of one percent from now to the end of the year. “Businesses should feel secure when making their trading plans,” said the governor.

Interest rates will be reduced if possible

The SBV highly appreciated the role of small and medium-sized businesses, customers which account for 60 percent of total outstanding loans in the economy. However, to meet the demand for capital of this group of customers, in the opinion of Governor Nguyen Van Binh, the SBV must put in place another mechanism that offers support for small and medium-sized businesses. Interest rates in the market have shown positive changes, but many businesses still complained that interest rates were still high and they expected further decreases. The governor said that SBV would keep a close watch on changes in the economy and the actual situation would be analyzed every 10-15 days so that the interest rates could be reduced as soon as there was an opportunity.

An interest rate of over 13 percent is currently applied to 16 percent of total outstanding loans, with an interest rate of over 15 percent applied to a mere five percent of total outstanding loans. The governor added that the over 13 percent interest rate is mostly applied to loans provided for high-risk consumers. The high interest rate is also applied to loans for real estate businesses. Real estate businesses with effective projects could borrow at an interest rate of 14-15 percent because their investment projects were highly profitable. An annual interest rate of 150 percent is applied to overdue debts.

In the time to come, SBV and credit institutions will hold further dialogues with businesses and local authorities to discover what further action can be taken to remove obstacles facing businesses./.

SBV Governor Nguyen Van Binh:

The banking system currently has very good liquidity that allows it not only to meet the economy’s demand for capital but also to have capital reserves so that it can pump capital into the economy when demand increases, without having any effect on inflation.

 Duy Minh