The dollarization rate in the economy has decreased sharply.
On July 17, speaking at a meeting with economic experts to discuss foreign exchange policies and USD deposit interest rates, Deputy Governor of the State Bank of Vietnam (SBV) Pham Thanh Ha said that in recent times, the SBV has focused on and consistently implemented the policy of ensuring that holding VND is more profitable than USD in managing monetary policy through interest rate and exchange rate tools.
Accordingly, the State Bank of Vietnam applied a ceiling interest rate on USD deposits of 1%/year for organizations in 2010 and 3%/year for individuals in 2011 and gradually adjusted it down to 0%/year from the end of 2015.
According to the Deputy Governor, applying the 0% USD interest rate policy is one of the synchronous solutions that the SBV has implemented to stabilize the foreign exchange market, anchor exchange rate expectations and enhance the position of VND.
Deputy Governor of the State Bank of Vietnam Pham Thanh Ha chaired the meeting.
Thanks to this policy, the exchange rate and foreign exchange market are stable. The dollarization rate in the economy has decreased sharply (foreign currency deposits/total means of payment decreased from 11.06% in 2014 to about 6.05% as of June 2024; foreign currency credit/total credit tends to decrease).
From 2016 to present, the State Bank has net purchased about 48.2 billion USD from credit institutions to supplement foreign exchange reserves (of which from 2016 to 2021 alone, the State Bank has net purchased about 71 billion USD from credit institutions).
Inflation was controlled and decreased sharply from double digits to single digits and maintained at a low level, raising the value of VND and converting USD resources among the people into capital serving the economy.
Besides, anti-dollarization, gradually shifting the mobilization - lending relationship to foreign currency buying - selling relationship, enhancing the position of VND.
Foreign currency mobilization sources meet domestic foreign currency demand, reflected in the credit/foreign currency mobilization ratio below 100% and decreasing steadily over the years from 77.43% in 2016 to 52.65% by June 2024.
Should keep USD interest rate policy at 0%
According to Dr. and Economic Expert Vo Tri Thanh, maintaining a 0% interest rate on USD has become an effective solution to support the goal of stabilizing exchange rates , controlling inflation and increasing the value of VND, especially in the current context when our country has moved to a new position.
In general, Dr. Truong Van Phuoc said that the positive results in stabilizing the macro economy were partly due to limiting dollarization.
At the meeting, economic experts also highly appreciated the application of the 0% USD interest rate policy that the State Bank has been implementing. According to Dr. Le Xuan Nghia, the State Bank has had a clear plan and roadmap from the beginning to maintain the direction of bringing the USD interest rate to 0%.
Although there are still some shortcomings, these difficulties can be adjusted and in general, the SBV's management of interest rate and foreign exchange policies has shown a positive impact on the macro economy.
Dr. Le Xuan Nghia recommended that the State Bank should continue to maintain and conduct a comprehensive assessment of this policy in the coming time, and at the same time continue to research to properly implement the policy of reducing dollarization set forth by the Party and State, which means reducing the "attractiveness" of holding USD in the future.
Dr. Le Xuan Nghia spoke at the meeting.
Sharing the same view in support of the policy of keeping the USD interest rate at 0%, economic expert Nguyen Xuan Thanh gave three reasons. First, in the short term, if the USD interest rate is changed, the market will see it as a temporary solution, which will have a negative impact.
Second, in the medium term, we look at the Fed's monetary policy. Although the USD interest rate is above 5%, in the medium term, the Fed will firmly control the interest rate at around 2%. In the medium term, the interbank dollar interest rate in the US market will be around 2.25%-2.3%. If so, we can maintain the 0% dollar deposit interest rate in the medium term.
Finally, in the long term, we will firmly shift from mobilizing and lending foreign currency to buying and selling foreign currency, thereby enhancing the position of VND.
Professor Tran Tho Dat believes that policy adjustments must be made based on some very inappropriate issues in reality, when the market experiences some major fluctuations. Professor Dat assesses that the market is currently very stable, there is no need for intervention at present and the USD interest rate policy of 0% should be maintained.
Concluding the meeting, Deputy Governor Pham Thanh Ha said that in the coming time, the State Bank will have a thorough assessment report on the implementation of the 0% USD interest rate policy in the past time.
The Deputy Governor once again affirmed that for Vietnam, anti-dollarization is a consistent goal that needs to be steadfastly implemented according to the policies set forth by the Party, State and Government, and is a long-term orientation that the SBV needs to continue implementing.
Regarding the future orientation, the Deputy Governor added that the SBV will continue to operate monetary policy tools synchronously and flexibly, closely coordinate with other macroeconomic policies to ensure the goal of macroeconomic stability, control inflation, and persistently shift the mobilization-lending relationship to foreign currency buying and selling, and combat dollarization according to the Government's policy.
Source: https://www.nguoiduatin.vn/chinh-sach-lai-suat-usd-0-ho-tro-hieu-qua-cho-muc-tieu-on-dinh-ty-gia-204240717214902111.htm
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