State Bank promises capital for production, rural development

The central bank assures money will be available for production and development, State Bank of Viet Nam deputy governor Nguyen Dong Tien told a recent press conference

Many economists have blamed the instability of the foreign exchange market for the dollarisation of the economy. Does the State Bank of Viet Nam (SBV) have a solution to put an end to this situation?

Recently the Prime Minister ordered State-owned corporations and economic groups to sell their foreign currencies to banks. Over the last 30 days, the banks were able to buy roughly US$450 million. They declared that they were willing to sell part of the sum to SBV.

To put a halt to the dollarisation of the economy, we've adopted many measures, including the strict enforcement of the Ordinance of Foreign Exchange.

In addition, banks have worked closely with provincial and municipal people's committees and media agencies to launch a communications campaign, and to monitor illegal foreign exchange activities carried out by unregistered jewellery shops or counters.

I'm confident that with strong support from the people and a series of measures put in place we'll win the battle in eliminating the illegal use of foreign currencies in daily transactions.

How will you tackle the issue of dual exchange rates?

I just want to confirm that there is no dual exchange rate policy in Viet Nam. Only the SBV has the right to set the exchange rates, and based on such rates credit organisations nationwide can sell and buy foreign currencies.

In reality, the dual rates sometimes exist when there is a shortage of supply. To solve this problem, I think that we need to have a stable macro policy, a stable financial market and appropriate and effective exchange rate policies.

I just want to reiterate that Viet Nam does not encourage the use of foreign currencies in daily transactions.

This is a big issue and the SBV is in the process of developing a regulatory policy on foreign exchanges. Once it is finished, we'll submit it to the Prime Minister for approval.

Last January, credit reserved for production increased by only 1 per cent. Enterprises have expressed their anxiety about the shortage of capital flows. What is your response to this?

The 1 per cent in the lending credit seems lower than the target set of 25 per cent for 2010.

That's normal for business and banking activities in the first few months of the year. In Viet Nam, January is the time for public offices and agencies as well as enterprises to have year-end meetings and work out business plans for the new year. A common practice is that normal business will only resume after Tet (Lunar New Year).

Furthermore, 1 per cent for January this year is not too low, compared with previous years. For example the figure for January 2005 was 1.4 per cent; 2006 declined by 1 per cent; 2007 increased by 0.9 per cent and 2009 by 0.65 per cent.

Under the Prime Minister's instructions in the early days of 2010, the SBV has implemented a series of measures to enable credit organisations to have sufficient capital to lend to small and medium-d enterprises for their production development.

Many commercial banks, particularly the Agriculture Bank (Agribank), have received about VND10 trillion ($540 million) from the SBV to lend out for agricultural activities and rural development.

In addition, the SBV has asked commercial banks across the country to give credit priority to agriculture and rural development activities, and to small and medium-d enterprises.

I'm convinced that these measures will boost development of the country's primary industry, and its rural development. — VNS