Vietnam Starts to Loosen Monetary Policies to Boost Liquidity for Economy

The State Bank of Vietnam, the country's central bank, has just decided to cut the benchmark rate to 12 per cent from 13 per cent, effective from Nov 5 to start loosening monetary policies to add more liquidity to boost domestic production and consumer spending after ten months of tightening the belts, Vietnamese state media said.

 

This is the second time SBV has cut the rates over the past two weeks.

 

SBV will cut the refinancing rate to 13 per cent from 14 per cent, discount rate to 11 per cent from 12 per cent, lowered compulsory reserves of dong deposits at local banks by 1 per cent and bank reserves of foreign currency deposits by 2 per cent.

 

SBV also requested commercial banks to extend due loans for customers to boost sales of rice, cement, steel...to support local companies facing difficulties from the global financial crisis.

 

Vietnam's central bank's rates cuts will push down deposit rates to 13 per cent-14 per cent from current 17 per cent per annum and lending rates to 15 per cent per annum, because lending rates are not permitted to exceed 150 per cent of the benchmark rate, the Tuoi Tre (Youth) newspaper said.

 

Many local businesses sighed with relief after the central bank announced to cut base rates because they are under pressures from banks to refund the loans while their sales are flat due to reducing demand due to impacts of the global crisis, the paper said.

 

Nguyen Van Dao, CEO of Godaco in the southern province of Tien Giang said bigger cuts are better because his company saw export markets shrink by 30 per cent due to the financial crisis and consumers tightening their belts, which are pushing down export prices and trimming orders.

 

 

Meanwhile, Nguyen Phuoc Thanh, CEO of Vietcombank said rates cuts are not all, but sales are much more important, local companies face dual difficulties including flat sales at home and shrinking export markets outside, therefore, they tend to curtail production.

 

The government of Vietnam has cut GDP growth rate to 6.7 per cent from 7 per cent, state media said. (SBV, Youth)