Borrowers despised dollar loans, dong regains its position
The Vietnam dong interest rates have been staying firmly low, while the dong/dollar exchange rate has been stabilized, which both have the local currency to regain its position in the people’s investment portfolios.
![](http://static1.vietstock.vn/indochinastock/images/2012/07/Dollar_bills.jpg)
Dollar outstanding loans on sharp decrease
Nguyen Thanh Long, Director of the Cashew Nut Processing and Export Company in Ba Ria – Vung Tau province, said the company has paid the debt in dollars back to VietinBank, adding that the company does not intend to borrow in dollars any more once the gap between the dong and the dollar loan interest rates has been narrowed and the exchange rate has been stable for a long time.
A report by the HCM City Branch of the State Bank of Vietnam showed that the foreign currency outstanding loans of the local banks had dropped by 12.1 percent by the end of August in comparison with late 2011. Meanwhile, the outstanding loans had decreased by 14.6 percent by the end of July.
By the end of August, the total capital mobilized in foreign currencies by the local banks had dropped by 3.93 percent from the end of 2011, while foreign currency deposits had just accounted for 21 percent of the total capital.
The current factors all support the rise of the dong and the fall of the dollar. The demand for dollars loans has decreased; the demand for dollar deposits from banks has also decreased. Meanwhile, the low offered dollar deposit interest rates of below two percent per annum and the stabilized dong/dollar exchange rate all do not encourage people to keep dollars.
Some commercial banks now lend dollars at the interest rates of 7-8 percent per annum at maximum. Meanwhile, the dong interest rate has decreased to 12-13 percent. Especially, Vietcombank now offers to lend dong at six percent per annum to the clients who have demand deposits, pay workers via the bank’s accounts and use closed services of the bank.
As such, in some cases, the interest rates of dong loans are equal to the dollar loans, which has certainly made dollar loans no more attractive.
Nguyen Hoang Minh, Deputy Director of the HCM City Branch of the State Bank, said the dong/dollar exchange rate has been stabilized in the last year, thus dashing the expectation about the dollar appreciation.
The interbank exchange rate has been stabilized at 20,828 dong per dollar since the beginning of the year. Meanwhile, the gap between the dollar prices quoted by commercial banks and the black market’s prices has been low at 10 dong per dollar. At some moments, the black market prices were even lower than the official rates – the thing that only occurs in the context of the profuse supply.
Dong regains its position
A banking expert said the dollar outstanding loans have decreased recently because a lot of dollar loans given in January and February 2012 have become matured. Meanwhile, businesses do not intend to borrow dollars to import materials for domestic production at this moment, because they anticipate the low purchasing power.
This partially explains why the trade deficit in the first eight months of the year was 62 million only, much lower than the 6.1 billion dollars of the same period of the last year. The narrowed trade gap has, of course, had big impacts on the exchange rate and the dollar loan demand.
A banker in HCM City has said since the dollar outstanding loans do not increase, banks have restricted the capital mobilization in dollar. The banker has also said the foreign currency trading volume has increased sharply in recent months. The bank is always ready to sell dollars to importers, while they do not have to wait for deliveries.
vietnamnet
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