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Vietnam dong may feel pressure as loans come due: ADB
The Vietnamese dong may come under renewed pressure in coming months as a wave of foreign currency loans come due, said Tomoyuki Kimura, country Director for the Asian Development Bank.
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Tomoyuki Kimura, country Director for the Asian Development Bank | Borrowing in foreign currencies surged 23 percent in the first six months of the year, and most are short-term loans maturing toward the end of this year, he told an investment conference on Wednesday. "The dong may come under downward pressure," he said without elaborating.
The dong has decline more than 20 percent since early 2008, under pressure from factors including volatile inflation and wide budget and trade deficits. Last year traders said the currency came under pressure from an increase in dollar demand as dollar-denominated loans came due.
The State Bank of Vietnam devalued the currency by 8.5 percent in February and later unveiled a package of measures known as "Resolution 11" to stabilise the macroeconomy. The dong held its ground against the dollar for about six months following the devaluation but has shed about 4 percent on the unofficial market since, trading on Wednesday around 21,450 per dollar.
"Investor confidence in the dong still remains fragile," said Kimura. "The State Bank of Vietnam must carefully balance efforts to support banks and corporations against the need to protect the real savings of depositors. Restoring investor confidence in the dong will require consistent and sustained policy actions."
While foreign currency lending was high, the government has said earlier this month bank loans rose by an estimated 8.16 percent in the first nine months of this year from the end of 2010. Credit growth slowed to 27.65 percent last year from 37.7 percent in 2009 and 53.8 percent in 2007, according to central bank data.
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