Vietnam Dollar Savings Low at 3.35 per cent Since Early 2009 on Strong Hoarding

The domestic black forex market in Vietnam has been pressured over the past days as its demand for imports is forecast to accelerate while supply of dollars is limited as exporters and people are racing to hoard greenbacks, according to a deputy governor of the central bank on May 19.

 

In the first four months, dollar-denominated savings were low at 3.35 per cent, dollars loans were up only 2.5 per cent, much lower than 11.6 per cent growth of dong-denominated credits, Deputy Governor of the SBV Nguyen Van Binh noted.

 

“This is abnormal practice,” Binh elaborated.

 

Binh also pointed out another reason for fevers of dollars: local firms tapped the 4 per cent subsidized lending program, which pushed down lending costs to 5 per cent-6 per cent, to borrow dong loans to buy dollars instead borrowing dollar-denominated credits to avoid risks relating to forex rates.

 

The margin between in dong-denominated loans and dollar-denominated credits is 2 per cent-3 per cent, therefore, the SBV proposed banks to lower lending rates of dollar deposits to 1 per cent-2 per cent from 2 per cent-3 per cent, Binh said.

 

The SBV said no reasons to sharply devalue the Vietnam dong, Binh told mass media earlier.

 

The Ministry of Industry and Trade is urging its subordinate units to closely work with the SBV to strictly deal with illegal forex trading activities and dollar quotations as part of efforts to stabilize the forex market.

 

Vietnam’s trade deficit is forecast to hit US$400 million in Jan-May and to widen to US$1.4 billion in the first half, the MOIT predicted. (Industry & Trade, Financial Investment)