On July 17, in Hanoi, the State Bank of Vietnam (SBV) held a meeting with economic experts to discuss foreign exchange and US dollar deposit interest rate policies, chaired by SBV Deputy Governor Pham Thanh Ha.
Deputy Governor Pham Thanh Ha speaks at the meeting – Photo: SBV
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Enhancing the Value of the VND
In her speech, Deputy Governor Pham Thanh Ha stated that, for many years, the Party, State, and Government have consistently directed the implementation of monetary policies aimed at controlling inflation, stabilizing the macro-economy, and reducing dollarization. The goal is to gradually shift the relationship from foreign currency mobilization and lending to buying and selling, thereby enhancing the value of the VND.
Following this direction, the SBV has flexibly and synchronously combined monetary policy tools to bring inflation down from double digits to single digits and maintain it at a low level. At the same time, the principle of ensuring that holding VND is more beneficial than USD has been consistently implemented by the SBV in its monetary policy management through interest rate and exchange rate tools.
Accordingly, the SBV has applied a ceiling on US dollar deposit interest rates of 1% per annum for organizations since 2010 and 3% per annum for individuals since 2011, gradually reducing it to 0% since the end of 2015.
According to the Deputy Governor, the application of a 0% US dollar interest rate policy is one of the synchronous solutions implemented by the SBV to stabilize the foreign exchange market, anchor exchange rate expectations, and enhance the value of the VND.
Thanks to this policy, the exchange rate and foreign exchange market have remained stable. Dollarization in the economy has decreased significantly (foreign currency deposits as a percentage of total means of payment fell from 11.06% in 2014 to about 6.05% as of June 2024; foreign currency loans as a percentage of total loans also showed a decreasing trend).
From 2016 to the present, the SBV has purchased a net amount of approximately 48.2 billion USD from credit institutions to supplement foreign exchange reserves (including approximately 71 billion USD purchased from credit institutions from 2016 to 2021 alone).
Inflation has been successfully curbed, decreasing from double digits to single digits and remaining at a low level, enhancing the value of the VND and converting USD resources held by the public into capital serving the economy.
Additionally, efforts to reduce dollarization and gradually shift from foreign currency mobilization and lending to buying and selling have contributed to enhancing the value of the VND. Foreign currency mobilization meets domestic foreign currency needs, as evidenced by the credit/foreign currency mobilization ratio being below 100% and consistently decreasing over the years, from 77.43% in 2016 to 52.65% as of June 2024.
Firmly Committed to Reducing Dollarization
At the meeting, economic experts highly appreciated the SBV’s measures to reduce dollarization.
According to Dr. Vo Tri Thanh, an economic expert, the SBV has seriously implemented the Party and State’s guidelines on reducing dollarization in the economy.
Maintaining a 0% interest rate on US dollar deposits has become an effective solution to support the goal of stabilizing exchange rates, controlling inflation, and increasing the value of the VND, especially in the context of Vietnam’s new position.
Dr. Le Xuan Nghia, an economic expert, stated that the SBV had a clear plan and roadmap for maintaining and moving towards a 0% US dollar interest rate from the beginning. Although there are still some shortcomings, these challenges can be addressed, and overall, the management of interest rate and foreign exchange policies by the SBV has had a positive impact on the macro-economy.
Dr. Le Xuan Nghia suggested that the SBV should continue to maintain and comprehensively evaluate this policy in the coming time. At the same time, further studies should be conducted to implement the Party and State’s guidelines on reducing dollarization, which implies reducing the attractiveness of holding US dollars in the future.
Some other experts also shared the view that the market is currently very stable, and there is no need for intervention by the authorities. They suggested that the 0% US dollar interest rate policy should be maintained.
Concluding the meeting, Deputy Governor Pham Thanh Ha stated that, in the future, the SBV will provide a thorough report on the implementation of the 0% US dollar interest rate policy in the past time.
The Deputy Governor once again affirmed that, for Vietnam, reducing dollarization is a consistent goal that needs to be firmly implemented according to the guidelines of the Party, State, and Government. It is a long-term orientation that the SBV needs to continue to deploy.
“Through practical management, the goal of reducing dollarization has been successfully implemented to a certain extent. The 0% US dollar deposit interest rate policy is the main pillar of the anti-dollarization policy, positively contributing to the stability of the monetary market, exchange rates, and the macro-economy,” emphasized the Deputy Governor.
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