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Tightened credit policy not relieving foreign currency shortage
With Decision No 09 stipulating the provision of foreign currency loans, the State Bank of Vietnam hoped that the foreign currency shortage would be improved. However, the decision has not helped.
The demand for US$ loans remains very high as business all want to borrow in US$ to enjoy low interest rates. However, the door to US$ loans seems to be closed to many businesses.
The director of an export company complains that it is always difficult to borrow money in US$, and it has been more difficult than ever since the decision came into effect.
Meanwhile, bankers say that the demand for US$ loans remains very high due to the trade deficit and the gap between the VND and US$ interest rates. Since the end of 2007, many banks have limited providing US$ loans, while only funding deals of importing ingot steel and equipment.
Le Dang Khoa, Head of the Capital Source Division under VIB Bank, said that banks in general find it very hard to arrange enough US$ to lend to clients, as the demand is increasingly high, while the supply is limited.
With Decision No 09 stipulating the provision of foreign currency loans, the State Bank of Vietnam hoped that the foreign currency shortage would be improved as the number of clients who needed US$ loans would decrease. However, bankers say that the situation has not improved.
Right after the decision was promulgated, the Vietnam Association of Seafood Exporters and Producers (VASEP) sent a dispatch to the Governor of the State Bank of Vietnam, requesting to add the exporters that have income in US$ to the list of those eligible for foreign currency loans. VASEP’s members, as well as many other exporters, do not belong to the three subjects eligible for foreign currency loans stipulated in Decision 09.
Previously, all export companies could get foreign currency loans as they have income in foreign currencies, which ensures their debt payment capability. However, the new regulation says that only exporters that need dollars to make payments for import materials can borrow in dollars.
VASEP said that the decision will cause difficulties for seafood exporters in the context of input material price increases.
In the first quarter of 2008, a lot of joint stock banks complained about the shortage of US$ capital. However, state owned banks are now also facing the same problem as the demand for importing goods has been increasing sharply.
Bankers all say that the US$ capital shortage will last for one or two more months.
Foreign banks began purchasing more foreign currencies earlier this week. They have even offered to buy hundreds of millions of dollars a day at VND16,300/US$1. However, the demand has only been partially met as Vietnamese banks themselves are seriously lacking foreign currencies.
Commercial banks are offering the highest possible prices for dollars. The dollar purchase price was VND16,145/US$1 on May 6.
The State Bank of Vietnam has reportedly sold $2bil in the last six weeks.
VNN
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