Fighting against dollarization will help stabilize exchange rate: experts

Created 23 August 2018
  • PDF
Editor Choice
Share
(0 votes, average 0 out of 5)
Experts have urged the government to stop accepting deposits in US dollars from the public, saying that this is a necessary to stabilize the forex market and exchange rate, and fight against dollarization.

vietnam economy, business news, vn news, vietnamnet bridge, english news, Vietnam news, news Vietnam, vietnamnet news, vn news, Vietnam net news, Vietnam latest news, Vietnam breaking news, SBV, exchange rate, trade war

vietnam economy, business news, vn news, vietnamnet bridge, english news, Vietnam news, news Vietnam, vietnamnet news, vn news, Vietnam net news, Vietnam latest news, Vietnam breaking news, SBV, exchange rate, trade war

In the context of the US-China trade war, some analysts believe that Vietnam needs to devalue the dong to help its enterprises boost exports. Others said this will do more harm than good because the action will increase costs for input material imports for domestic production.

Asked if Vietnam would devalue the dong to support export in the context of the yuan depreciation, Deputy Governor of the State Bank (SBV) Nguyen Thi Hong said at a press conference that SBV doesn’t aim at single purpose in regulating the exchange rate, but strives for macroeconomic management.

Some analysts believe that Vietnam needs to devalue the dong to help its enterprises boost exports. Others said this will do more harm than good because the action will increase costs for input material imports for domestic production.

Hong went on to say that Vietnam needs to keep close watch over the performance of many currencies, not only the yuan, when regulating the forex policy.

Meanwhile, Andreas Hauskrecht from Indiana University said in order to stabilize the forex market and exchange rate, Vietnam needs to be firmly determined in the fight against dollarization, aiming to stop capital mobilization and lending in dollar.

The expert stressed that in other countries, commercial banks don’t accept deposits in non-local currencies. To date, the Vietnam dong has been perched on the US dollar, but the State Bank needs to be more flexible in the time to come to create stability for monetary policies.

In the past, as the inflation rate was always high, the dollarization in Vietnam was alarming. The amount of deposits in foreign currencies amounted to 20 percent of the total money supply in 2007-2011. The ratio was even higher, in 1990s, at 30-40 percent.

At that time, people made payments in dollars and hoarded dollars, while the dollar price in the black market was by far higher than the official market, thus putting pressure on the official market. The uncertainties in exchange rate and the forex market in that period was one of the causes behind macroeconomic uncertainties. 

In such a context, the central bank, in order to implement the task of fighting against  dollarization, decided to apply the zero-percent interest rate policy for dollar deposits. This means that dollar depositors cannot make any profits with the foreign currencies deposited at banks.

The policy was believed to help reduce the dollarization ratio from 11.06 percent in 2014 to 8.21 percent in late 2017. 

A finance expert affirmed that the zero-percent interest rate policy has not had any negative impact on overseas remittances, foreign portfolio investment and FDI flow into Vietnam,

According to Can Van Luc, a banking expert, the dong depreciation of 3 percent would be ‘acceptable’ this year.

 

Source: Thanh Lich - Bridge

Maybe You Also Interesting :

» Vietnamese enterprises ‘cautiously optimistic’ about trade war opportunities

Great benefits for Vietnamese enterprises from the US-China trade war are possible, but enterprises have been warned they may face risks without thorough...

» Vietnam’s banks nearing Basel II standards

While banks in other countries are following standards of Basel III, Vietnam has only two banks expected to be recognized as meeting Basel II standards in the...

» BUSINESS NEWS IN BRIEF 8/12

Seafood export earnings surge 6.8 percent in 11 months,National IIP rises 10% in 11 months,Central bank’s exchange rate hits highest level in months,VN...
loading...

Popular News Categories:

- Asia & Asean  |  EU & Russia  |  America

- Facts  |  Urban  |  Faculty  |  Environment

- Business  |  Finance  |  Market Health

- Destination  |  Cuisine  |  Arts Music

- Cinema  |  Soccer  |  Sports  |  IT & Internet