Specifically, foreign currency outstanding loans last year surged by six times against the previous year, data of the National Financial Supervisory Commission (NFSC) showed.
Foreign currency credit growth reached 5.4 percent in Q1 2018
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Economic expert Le Xuan Nghia said that with the characteristics of Vietnam economy, the dollarization ratio at less than 10 percent is acceptable.
Late last year, SBV decided to extend a policy allowing exporters to take loans in foreign currencies until the end of this year instead of stopping it on December 31 last year as planned.
Under Circular 18/2017/TT-NHNN, commercial banks can provide short-term loans in foreign currencies to export firms that need funds for production and have turnovers in foreign currencies. After receiving such loans, the exporters must immediately sell the amount of foreign currency borrowed to the lending institutions, using the spot forex trading method, except in cases where the foreign currency will be used to make payments.
According to the central bank, it decided to extend the policy to help local exporters increase their competitiveness and boost exports since their businesses and production still face difficulties. This is also among the Government’s incentive policies aimed at supporting and developing local enterprises until 2020, which was approved in Decree 35/NQ-CP, issued in May 2016.
Thanks to this policy, exporters have the opportunity to borrow foreign currencies at low interest rates. Currently, lending interest rates for short-term US dollar loans are roughly 2.5-4 percent, while the rate for short-term VND loans is some 7-9 percent.
Financial and banking expert Nguyen Tri Hieu said the extension is necessary to avoid the country’s exports operating at a disadvantage. He believes that the extension will not affect the Government’s anti-dollarization policy as the nation’s foreign exchange is relatively stable. Moreover, the banks’ disbursement of foreign currency loans is in VND, not the greenback.
Echoing Hieu, expert Can Van Luc said the Government should pursue the anti-dollarization policy but should not do so at all costs. It should fight against dollarization but should still create favorable conditions to support firms, especially exporters, he added.
SBV deputy governor Dao Minh Tu said it is only a short-term policy. In the long run, the central bank will discontinue the policy, and firms must gradually shift from borrowing to buying and selling foreign currencies.
He said although some exporters should be given priority so they can take advantage of the policy, others whose turnover in foreign currencies is modest should not continue to enjoy it as this has proven to be unfair.
The exchange rate in the domestic market in the first months of this year was generally stable with the listed exchange rate at banks rising by only some 0.2 percent, despite large fluctuations in the global financial market.
According to experts, the exchange rate this year will continue being supported by abundant supply of foreign direct investment, foreign indirect investment, divestment of state capital and remittance.
Besides, they said, the ability to keep the exchange rate market’s stability is within the reach of the central bank thanks to the country’s high foreign reserves of US$63 billion.
