Exchange rate fluctuates by 1%, businesses lose 300 billion VND

With large outstanding loans and foreign currency costs, businesses said they would lose hundreds of billions of dong every time the exchange rate fluctuates.

At the conference to remove difficulties for production and business on March 14, Mr. Dang Ngoc Hoa, Chairman of the Board of Directors (BOD) of Vietnam Airlines said that the airline has passed the most difficult period, recovering 80-90% of flight routes compared to before the Covid-19 pandemic.

However, Mr. Hoa said that with a 1% change in the exchange rate, the airline loses 300 billion VND. If the exchange rate fluctuates 5%, the airline's annual costs increase to 1,500 billion VND.

"Vietnam Airlines really wants the exchange rate to be stable, at the lowest possible level," said Mr. Hoa.

Stabilizing the exchange rate is also a proposal made by Mr. Le Manh Hung, Chairman of the Board of Directors of the Vietnam Oil and Gas Group (PVN). The group's outstanding foreign currency loans are currently VND38,000 billion, equivalent to about USD1.5 billion. Therefore, fluctuations and risks in exchange rates greatly affect the group's production and business activities, according to Mr. Hung.

"Recently, the State Bank has managed a stable exchange rate, helping businesses minimize the impact of foreign currency fluctuations. We hope to have a solution to maintain a stable exchange rate in the future," said the Chairman of PVN.

Mr. Dang Ngoc Hoa, Chairman of the Board of Directors of Vietnam Airlines. Photo: VGP — Mr. Dang Ngoc Hoa, Chairman of the Board of Directors of Vietnam Airlines, spoke at the conference on monetary policy and removing difficulties in production and business, March 14. Photo: *VGP*

Recently, foreign exchange rates have increased sharply, especially after the Lunar New Year. Since the beginning of the year, the exchange rate on the official market has increased by 1.8% while the free USD price has increased by 3.75%. While the greenback price in banks cooled down when approaching the 25,000 VND mark, it still increased sharply on the free market, reaching a record 25,700 VND.

The reason for this development comes from the prolonged USD/VND interest rate gap and the monetary policy trend of the US Federal Reserve (Fed), making the demand for USD attractive in the first half of 2024.

From March 11, the State Bank resumed offering treasury bills, attracting nearly VND30,000 billion in the interbank market. This is an indirect move to stabilize the exchange rate through controlling interbank interest rates, narrowing the VND/USD interest rate gap.

However, unlike businesses with outstanding loans or expenses in foreign currency, the export sector has the opposite view. Mr. Le Tien Truong, Chairman of the Board of Directors of Vietnam National Textile and Garment Group (Vinatex), said that in the period of 2022 - 2023, major textile and garment exporting countries such as China, India, Bangladesh or Turkey all tend to devalue their domestic currencies to stimulate exports.

Türkiye’s currency has fallen by 50%, Bangladesh’s by 21%, and China’s yuan by 11% over the past two years. This makes Vietnamese textiles 15% more expensive than those countries, if only considering exchange rate fluctuations.

"With the exchange rate decreasing by about 5% over the past two years, Vietnam's export industries are facing many difficulties compared to other countries. We do not dare to say how much it should decrease, but perhaps 5% is still low and difficult for exports to recover," said Mr. Truong, adding that the exchange rate is one of the reasons for the 10% decrease in textile and garment exports in two years.

Minh Son

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