VietFinanceNews.com - Commercial banks now have abundant foreign currency reserves to sell to the State Bank of Vietnam (SBV), says Nguyen Quang Huy, Director General of the SBV Foreign Exchange Management Department.
According to Huy, it is rumoured that businesses are purchasing US dollars because they are worried about exchange rate fluctuations.
Commercial banks have clear information about businesses’ demands for foreign currencies because they all have to prove a legitimate purpose when buying foreign currencies.
Import surplus has no impact on exchange rate
In theory, there is always a connection between an import surplus and the exchange rate so many people worry about the impact of the trade deficit on the exchange rate.
However, Huy says, Vietnam’s current exchange rate is not seriously affected by the trade deficit because there are other sources of exchange currencies such as overseas currency exchange, foreign direct investment (FDI), and income from the tourism industry.
What is more, the Government has issued a resolution to stabilize the macro-economy, control the inflation rate, and achieve a growth rate of 6.5 percent in 2010.
To implement the Government’s directive, relevant ministries and agencies have enacted measures to reduce the trade deficit and ensure the balance of payment.
An import surplus is unavoidable in a developing country like Vietnam, says Huy. But the Government and ministries are all conscious of the problem and have used effective methods to minimize its impact on the exchange rate and the stability of the macro-economy.
Huy believes that all sources of foreign currencies including overseas currency exchange, FDI, and earnings from the tourism industry will increase in 2010.
In the first quarter of 23010, the overseas currency exchange saw a sharp increase of 30.5 percent compared to last year and is estimated to reach US$3.6 billion in June.
Together with measures to reduce the import surplus, the increasing supply of foreign currencies will contribute to an improved balance of payment in 2010, Huy says.
Safe foreign currency credit growth
When the stimulus package in Vietnamese dongs came to an end, many businesses preferred borrowing US dollars because there is a difference between the loan interest rate in US dollars and that in Vietnamese dongs, Huy argues on the grounds of foreign currency credit growth and pressure on the exchange rate between the US dollar and Vietnamese dong in recent months.
Although foreign currency credit has increase sharply since 2009, it is still under control as the SBV has asked credit organisations to hold foreign currency credit growth to a safe level.
Commercial banks’ good liquidity in capital mobilization and loans shows that they now have abundant foreign currency reserves. They all affirmed they are keeping the ratio between lending and borrowing at a safe level.
