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SBV allows rice exporters to borrow from banks
The governor of the State bank signed an official document on August 11, allowing commercial banks to lend money to rice exporters to buy rice even if the exporters have not signed any contracts. This is in a bid to help farmers sell four million tonnes of unsold rice.
The decision was made two days after an online meeting, held by the Ministry of Agricultural and Rural Development to seek solutions to help farmers and wholesalers deal with unsold rice.
According to reports from 13 Cuu Long (Mekong Delta) provinces, from now until the end of the year, the total amount of rice that needs to be sold is four million tonnes. Amongst the provinces, An Giang has the largest amount (1.4 million tonnes), followed by Kien Giang (500,000 tonnes) and Dong Thap (400,000 tonnes).
Currently, prices in the province range between VND4-4.5 million per tonne while in June, during the rice fever, rice was being sold at VND6 million per tonne.
During the online meeting, deputy chairman of the Dong Thap Provincial People’s Committee Vu Trong Nghia said, “ Farmers can’t sell rice because businesses do not want to buy. They are wary of the banks’ high interest rates, and if they keep buying rice but fail to sign any export contract, they will suffer losses.”
Meanwhile due to the low prices, farmers are also suffering from high interest rates on loans used to buy equipment and fertiliser. Each month, they have to pay 3 percent in interest, said Pham Kim Yen, deputy chairwoman of An Giang Province’s People’s Committee.
Along with the new regulation, wholesalers can now enjoy the lowest annual interest rate of 19.9 percent instead of 21 percent as before.
The State Bank will stand side-by-side with the agricultural sector and if the macro-economy stablises and inflation is curbed, the rate will be lowered to 18.5 percent, Giau said.
Commercial banks will also extend the time frame on farmers’ loans or even lend more if farmers fail to sell their rice.
Responding to some companies who asked to borrow foreign currency to avoid the high interest rates on loans in dong, Giau said that it would be hard to control if companies bought domestic agricultural products with foreign currencies.
He encouraged financial institutions with sound financial and management capabilities to lend to rice producing businesses at reasonable interest rates and buy foreign currencies from rice exporters, “This will prevent the economy becoming messy and dollarised,” Giau said.
Minister of Agricultural and Rural Development Cao Duc Phat said that farmers and companies should keep calm and not rush to sell off their rice, “If farmers really need capital, commercial banks are committed to lend to them. It is predicted that the world’s demand for rice will continue to rise, so rice prices will probably increase.”
The Vietnam Food Association suggested that there should be a floor price at which farmers would sell rice to businesses. However, according to the Ministry of Trade and Industry (MTI), rice prices are different around the country and depend on quality, thus the State should not create a floor price.
Deputy Prime Minister Hoang Trung Hai also agreed with the MTI. He said that previously, Vietnam had applied a floor price but the move did not work and farmers did not enjoy any benefits.
He stressed that, “In the near future, there should be a mechanism to balance the profits of farmers with those of businesses in case of price fluctuations.”
Hai has sympathy for farmers and enterprises, but said that imposing taxes on rice exports was necessary, so the government could use part of enterprises’ profits to invest in future agricultural development.
Prime Minister Nguyen Tan Dung decided that an export tax would not be put on rice exports when the Free on Board (FOB) selling price was under US$800 per tonne.
On August 7, Prime Minister also asked the Northern and Southern foodstuffs corporations to buy 400,000-500,000 tonnes of rice this month to ensure the volume of rice exports under signed contracts and that farmers should be given 40 percent of the profits.
VOV
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