10:49 | 14/07/2016 Finance - Banking
(VEN) - The State Bank of Vietnam (SBV) decided to loosen the time for short-term foreign currency loans to export businesses.
Circular 24 stipulated that Vietnamese commercial banks were banned from offering short-term foreign currency loans from April 1, posing difficulties for businesses in agricultural and seafood exports due to the difference in interest rates. According to calculations, interest rates on foreign currency loans reached 2-2.5 percent a year, while these rates on Vietnamese dong loans stood at 6-6.5 percent a year. This large difference led the competitiveness of goods and services to be lower, especially for agro, forestry and fishery exports.
Following feedback, the SBV decided to loosen the time for short-term foreign currency loans for trade and production until the end of this year. This adjustment was necessary in order to create favorable conditions for businesses in an attempt to boost the economy.
Vietnam Association of Seafood Exporters and Producers (VASEP) Secretary-General Truong Dinh Hoe said that VASEP had nearly 300 members with total export turnover of US$6-7 billion a year. Although bringing a large amount of foreign currencies to the economy, these businesses faced difficulties due to Circular 24. Therefore, a decision to loosen the time for short-term foreign currency loans to export businesses was appropriate.
Short-term loans with suitable interest rates will help companies feel more secure about their business plans, while exports will be more competitive.
Economists have expressed their concerns about pressure on foreign currency liquidity. However the SBV has bought US$7 billion since the beginning of the year to increase foreign currency reserves. In addition, the foreign exchange market is expected to be stable in June, while exchange rate is forecast to range from VND22,300-22,500 per dollar. Therefore, the SBV is completely active in response to foreign exchange market developments.
Economist Nguyen Tri Hieu said that foreign currency loans to reduce costs were necessary for the Vietnamese economy due to the large dependence on exports.