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Thin dollar supply prompts bond issue plan
Slowing inflows of foreign currency deposits at banks coupled with a drop in Vietnam's exports have cut into the funds used for honoring import contracts and prompted the government to plan a sale of dollar bonds.
The first issue would come before March 15 to boost reserves and help repay imported equipment for power plants, Deputy Minister of Finance Nguyen Cong Nghiep was quoted Monday as saying by the weekly Vietnam Investment Review.
Nghiep did not give the size of the issue but a ministry source told Reuters last week the government plans to raise US$1 billion in several tranches.
The source said the bond would probably be issued later in the month or in early April.
The State Bank of Vietnam's monthly report said January to February bank deposits in foreign currencies, mostly in US dollars, rose only 1.13 percent from the end of 2008.
The report did not give any reason for slowing inflows, but banks have cut dollar deposit rates by 0.2-0.5 percent from the end of last year, the central bank said. It noted that interbank funds were sufficient.
Banks are now paying between 2.8 percent and 3.2 percent for 12-month dollar deposits.
Fixings on rates on interbank dollar loans for terms from one week to two months gained 0.01 to 0.04 percent on Monday, according to Reuters data.
The highest rise was on one-week loans, with the rate climbing to 0.79 percent from 0.75 percent last Friday.
The government's statistics office reported exports in the first two months of this year dropped 5 percent from a year earlier to $8.02 billion.
New foreign direct investment pledges in the two-month period stood at $1.51 billion, less than a third of the pledges for the same period last year of $4.89 billion, Planning and Investment Ministry reports said.
On the interbank market, “banks tended to keep the dollar/dong rate close to the ceiling,” the central bank said in its weekly report on the money market ending March 4.
On Monday, the dollar was quoted at VND17,481 which was at the top end of the 3 percent band around the mid-point set by the central bank in which it is allowed to trade. The central bank's mid-point on Monday was VND16,972.
The central bank has kept the dong stable this year against the dollar, allowing the mid-point to fluctuate up or down by only a few dong.
Several economists have said Vietnam should devalue the dong to around VND18,000 per dollar to boost exports.
ANZ's monthly economic report for March forecast the dong would fall to VND17,800 per dollar in June and VND18,500 by December.
Reuters, thanhnien
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