Customers buy gold at a Bao Tin- Minh Chau Jewellery Company shop in Tran Nhan Tong Street, Hanoi (Photo: VNA)At a working session with SBV last week,Government Office chairman Mai Tien Dung said the Prime Minister has asked SBVto study a more appropriate interest rate policy to encourage local US dollarholders to deposit the currency in banks, as the current interest rate of zero percentdiscourages them to put money in credit institutions. At present, Vietnam stillhas to borrow dollars from international markets at 4 percent interest, so thereshould be suitable policies to tap dollars at home, he noted.
It is the third time the Prime Minister hasmentioned the issue.
Vietnam stopped the mobilisation of gold in2011, and a similar move was applied for the dollar in 2015 when the zero percentinterest rate for dollar deposits came into effect. The policies havecontributed to restricting dollarisation and goldenisation in the economy andavoiding chaos in the market, with locals not using the dollar and gold asmeans of payment.
However, with the application of thepolicies, for gold alone, it is estimated that there are currently some 500tonnes held by the people, which would be very useful if converted into the dongto invest in the economy.
A similar trend was also seen for the idle dollarsource. SBV applied the zero percent dollar deposit policy in December 2015,which has contributed to curbing dollarisation in the economy, controllinginflation and stabilising the macro economy. However, it has also preventeddollar holders from depositing the greenback in banks.
As a result, some experts felt it is timeto get rid of the policy while the dollar/dong exchange rate was relativelystable and inflation was low.
Tien Phong Bank director Nguyen Hung saidit would be difficult to continue with the policy, especially with the USFederal Reserve increasing the interest rate. As the economy’s resources reachtheir limit, the benefits of adjusting interest rates higher to mobilisedollars to create new stimulus and generate a large source of capital for thebanking system should be calculated, he added.
Echoing Hung, banking and finance expert CanVan Luc also proposed to adjust the interest rate upwards, since according tohis analysis, that local demand for dollar loans was very large.
According to Luc, in the first half of 2017alone, demand for foreign currency loans increased by some 5 percent against1.5-2 percent in the same period of 2016. Commercial banks were borrowingdollars from abroad at an interest rate of 2.5 percent per year. Mobilisationfrom the local people would be cheaper and not subject to several restrictions.This move would contribute to lowering both input and output interest rateswhile still avoiding a dollarisation situation, he said.
If the interest rate was maintained at zeropercent, keeping dollars at home or depositing them in banks was the same, butif the three-month term had low deposit rates, such as 0.25 percent, thenpeople would consider depositing dollars in banks. This would generate arelatively stable capital source for banks. If the term was more than one year,the medium and long term mobilisation structure of the banking system would beraised, the expert analysed.
Besides using banks as an indirect channelto mobilise dollars, Nguyen Van Thuan from HCM City Finance and MarketingUniversity also proposed to use the stock market as a direct channel to attractthe source.
However, he said, the Government shouldtake more measures to make the stock market more transparent, with listed firmspaying due heed to sustainable growth, to attract dollar and gold holders.
To mobilise gold, Luc proposed to issuegold free interest rate deposit certificates, which the holders could mortgageat banks for loans.
According to Luc, the measure was moreflexible and would not increase goldenisation in the economy. He said othercountries such as India had been successful in applying this measure; however,he noted that the application must be scrutinised and if it adopted, a suitabletime must be chosen.
Tien Phong Bank’s Hung also affirmed thatsuccessful gold mobilisation to reinvest in business and production would bebeneficial, but it should have an appropriate policy as gold is quite differentfrom money.
Gold mobilisation is complicated and riskyas its price depends on the global and domestic market, he said, adding carefulscrutiny is required to make the mobilisation effective.
Experts also agreed that the most importantthing was to keep the macro economy stable and create a favourable businessenvironment, explaining that gold and dollar holders would automaticallyconvert it into dong when they found profitable opportunities in a stable macroeconomy.-VNA
VNA
