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Ministry hikes rates on State-subsidised loans
Interest rates on State-subsidised loans extended through the Viet Nam Development Bank or the Bank for Social Policy for export or investment purposes will be increased from 9.6 per cent to 11.4 per cent per year for Vietnamese dong-denominated loans and from 6 per cent to 6.6 per cent for loans made in US dollars, under a new regulation by the Ministry of Finance.
Duong Duc Minh of the Ministry's Department of Banking and Financial Institutions said the increase was due to the State Bank of Viet Nam's recent hike in the prime rate from 8 per cent to 9 per cent.
"The increase in the prime rate widened the gap between State-subsidised loans for investment and export projects and commercial bank rates," Minh said.
Lending interest rates on Vietnamese dong-denominated medium- and long-term loans were now averaging 14.5-16.5 per cent, and even a number of sectors enjoying priority rates, such as agricultural and export enterprises, were having to borrow at 13-15 per cent per year.
The ministry had also seen yields for Government bonds rise to 10.7 per cent, causing the sale of bonds to drop off last month to only VND400 billion (US$20.5 million), Minh said.
He also said that the increase in State-subsidised interest rates also reflected the overall trend of lending interest rates on the market, while the high rates on US dollar-denominated loans would reduce pressure on the dollar supply.
If market rates continued to rise next year, the ministry would make further adjustments to the subsidised rates as required under Viet Nam's commitments to the World Trade Organisation, he added.
The State has allocated about VND 4.5 trillion ($230 million) next year from the State budget to fund interest subsidies, an increase of VND800 billion ($41 million) over this year's rate, according to ministry figures.
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