The State Bank affirmed that it has not raised the issue of adjusting interest rates, whether increasing or decreasing

The State Bank affirmed that it has not raised the issue of adjusting interest rates, whether increasing or decreasing

That was shared by Standing Deputy Governor of the State Bank Dao Minh Tu at the Vietnam Economic Forum 2024 organized by Nguoi Lao Dong Newspaper on the morning of April 25.

Operating monetary policy is very difficult

Sharing at the Forum, the Deputy Governor said that from the perspective of the State Bank (SBV), the problem is how to maintain the current interest rate and keep the exchange rate stable. These are the two most basic factors, especially for import-export enterprises; along with the best credit access conditions and the most adequate capital.

Managing monetary policy and banking operations in the first 3 months of the year and now almost the end of April must be said to be very difficult, in the context of the economic situation being greatly affected both internationally and by economic difficulties. The internal difficulties of the economy are sometimes even more difficult.

Credit in the first 2 months of the year was negative and could not grow, even though the mechanism, apparatus and policies remained the same. Credit demand is non-existent, investment and consumption demand are low while businesses are still facing difficulties.

Businesses are also facing many difficulties, orders have increased but prices have grown very large. By March and at this time, some localities had quite large and positive increases and currently about 1.5% credit growth.

Currently, along with monetary policy, other support policies from the Government and ministries are also being actively implemented to promote investment demand, consumer demand, and credit demand.

The State Bank has not raised the issue of adjusting interest rates

Regarding capital issues, liquidity of credit institutions is still abundant. Enterprises that have effective projects that meet minimum credit conditions will definitely be granted loans.

Right from the beginning of the year, the State Bank has proactively taken measures to assign credit limits to commercial banks. Accordingly, this year’s target credit growth will be 15% and if necessary and macroeconomic indicators allow, it will increase further.

Interest rates have been very low for several decades now, especially for new loans. Interest rate management requires reasonableness, because it is related to exchange rate policy. Therefore, the State Bank has taken the view to lower interest rates but must be consistent with the macroeconomic context and inflationary pressures.

The State Bank affirmed that it has not raised the issue of adjusting interest rates, whether increasing or decreasing, but maintaining the current operating interest rate and encouraging credit institutions to reduce lending interest rates, especially in priority areas.

The policy of extending and postponing unpaid corporate debts will last until the end of this year instead of only until June 30 when the State Bank of Vietnam amended Circular 02. At the same time, commercial banks will continue to deploy credit packages. incentives, creating preferential capital sources for businesses.

The State Bank also directed commercial banks to apply technology to reduce costs for businesses. This is an urgent factor.

In addition, banks also promote consumer credit, solving consumer demand and inventory right in the domestic market. At the same time, promote the connection between banks and businesses Ho Chi Minh City is the leading place.

Stable, not fixed exchange rate

Regarding the exchange rate, Mr. Tu said that recently there have been fluctuations and VND has also accepted to lose value compared to the beginning of the year. In 2023, VND will depreciate about 2.6%, but compared to surrounding countries, maintaining this level will be a very difficult effort.

At a press conference in early 2024, the State Bank of Vietnam announced that if necessary to stabilize the exchange rate, it will use foreign exchange reserves to intervene. Up to now, the central exchange rate of the State Bank has also decreased to 4.8% compared to 2023. However, this devaluation is still positive compared to many markets such as Taiwan (China) 5.96%; Thailand, Japan, Korea, and Switzerland all depreciated much more…

Due to the openness of the economy, managing the exchange rate at this time is very important. The State Bank will manage the exchange rate appropriately.

Regarding the policies of the FED and other countries, we expect the FED to lower interest rates but so far there is no policy information. USD appreciation is at its highest level ever. Reduced investment demand and protectionist policies of major countries. World consumer demand also decreased, affecting the exports of Vietnamese enterprises; Transportation logistics pushes product prices high; raw materials and goods of affected countries; Fear of tension and conflict in the Middle East caused gold prices to skyrocket. The world gold price has never exceeded 2,400 USD/ounce… which has impacted the exchange rate and directly impacted Vietnam’s import and export businesses.

In addition, VND interest rates decreased rapidly, causing an imbalance between VND and VND interest rates USD also pushes up the exchange rate. Import and export are relatively vibrant, so the source of foreign currency for imports also consumes a large amount of foreign currency.

In case of export difficulties, the source of imported foreign currency will be less even though remittances will still flow. In addition, market psychology also influences the exchange rate to go up.

According to the Deputy Governor, the exchange rate is a big problem in the economy and if not managed effectively, it will affect inflation. Therefore, the State Bank also raised the issue of exchange rate management and administration in the coming time.

We stabilize the exchange rate, not fix it, ensuring that the foreign currency status is zero and cannot be negative. There are solutions to do this such as: regulating the amount of money in circulation to harmonize; Manage interest rates appropriately to harmonize with exchange rates, calculate reasonable levels to achieve both goals.

The State Bank still maintains the policy of lending foreign currency to priority goods because only exports have foreign currency. Therefore, areas such as coffee export are gaining value, so banks must prioritize lending; VND 30,000 billion package for seafood export; Wood export… is also implemented drastically by the State Bank of Vietnam in coordination with business associations. Similarly, the State Bank also directed to promote rice business loans for the rice sector in the Mekong Delta and other fields.

The State Bank affirms that in the State Bank’s policies, exports are always given priority.

Manage the central exchange rate to prevent speculation and hoarding of foreign currencies. The story of hoarding and speculation by commercial banks; Promote tools to get maximum benefits for businesses and the final measure is administrative in nature, when forced to sell foreign currency. Although this is just the first step in being ready to sell foreign currency.

Finally, we hope that businesses and the economy should not expect to hold or invest in foreign currency to create pressure on the foreign exchange balance for the economy, so that businesses and commercial banks can carry out the same. Currently fulfilling the goal of supporting the economy.

Regarding green credit: The State Bank is working with ministries and branches to identify and develop policies. Green credit and green projects, so that both banks and businesses understand clearly, have clear mechanisms and legal corridors, especially capital sources for credit.

Nhat Quang

FILI