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Central bank promises flexible monetary policy
The government will maintain a flexible monetary policy and tailor the forex policy to support exports while also following market signals, the central bank governor said Wednesday.
Nguyen Van Giau, taking questions from National Assembly delegates on measures to combat inflation and cope with possible deflation, said the State Bank of Vietnam (SBV) would closely observe changes in the domestic and international markets and offer policy advice to the government that would not hurt the economy.
With the US and other major economies slowing, the SBV has established five independent groups to examine the possible impacts of the global financial crisis on Vietnam, he said.
“We will pursue flexible management (of monetary policy) while avoiding any impact on the macro economy.
“We have identified exports as a [growth] driver and our policy has been to support exports,” he said, citing the weakening of the dong since 2007.
Asked about the foreign exchange policy, Giau said the SBV would base it on the market supply-demand status. Vietnam has developed a foreign exchange rate regime on the basis of supporting exports, under which the dong has fallen by 6 percent this year.
Vietnam would “build up our policy on foreign exchange rates based on the market demand and supply,” Giau told the assembly.
The comments came a week after the central bank cut the three most important interest rates.
It also widened last week the band in which the dong trades against the dollar, effectively allowing it to depreciate to boost exports and propel growth. The government has forecast economic growth of 6.7 percent this year and 6.5 percent next year.
To ensure the safety of the financial system, the government has agreed to temporarily stop licensing new commercial banks, which have mushroomed recently, he said.
Asked about the tight monetary policy which has made it hard for small- and medium-sized enterprises (SMEs) to get credit, he said banks are lending to firms that meet their criteria. But he did not answer a question on measures to help SMEs stave off bankruptcy.
The monetary policy was tightened in May 2007 when the central bank decided to increase the compulsory reserve commercial banks have to maintain to 10 percent from 5 percent, and then to 11 percent in January.
Property-based loans
At Wednesday’s house session, the governor said commercial banks have “poured money into the real estate market.”
Their outstanding real estate loans stand at VND115 trillion (nearly US$7 billion), or 9.15 percent of total outstanding loans, he said.
But the SBV has addressed the situation in a “timely” manner by asking commercial banks to cut lending to speculators, he said, adding that outstanding loans to the real estate sector in Ho Chi Minh City had fallen by VND8.5 trillion ($515.2 million) in October since late 2007.
Due to concerns about the stock market, he said, the SBV has also taken measures to reduce outstanding loans given against securities to a fourth from VND25.2 trillion ($1.5 billion) in June 2007.
The banking system remains fairly safe, with bad debts worth VND35 trillion at the end of September, or just 2.92 percent of total loans, he said, revealing banks have set aside VND22 trillion in contingency funds.
The January-October credit growth slowed to 19.6 percent from 37 percent in the same period last year, with the government targeting a cap of 30 percent against 54 percent last year.
Ngan Anh
Thanh nien, Reuters
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