(Bloomberg) — Vietnam’s central bank reiterated it’s willing to sell US dollars to keep the dong stable in the local money market and maintain macroeconomic stability, State Bank Governor Nguyen Thi Hong said on Monday.
The central bank will “continue curbing inflation while stabilizing the dong,” Hong said in comments to legislators during a National Assembly meeting. The State Bank of Vietnam wants to push for further lower lending interest rates “but if it does that too much, the foreign currency market and exchange rates will be affected,” she added.
Vietnam set its reference rate for the dong at a record low on Nov. 7, setting the stage for more weakness in the Southeast Asian nation’s currency as the dollar’s surge pummels emerging markets. Asian central banks are adapting to a strong dollar world after Donald Trump’s election win fueled a rally in the greenback.
The dong, which traded at 25,300 per dollar on Monday, is about 0.7% away from a record low. The currency has lost about 4% this year, according to data from banks compiled by Bloomberg. The State Bank today set its reference rate at 24,263 dong per dollar on Monday, near its weakest since at least 2005.
Hong said the central bank’s current zero-interest rate for dollar deposits policy is good for maintaining macroeconomic stability. Setting a higher dollar deposit rate “may spur depositors to switch to dollars, and that can pose risks to the dong,” she said.
SBV also sees bad debt rising with non-performing loans at 4.55% of total lending in the banking system, Hong said. The central bank estimates that total outstanding loans of the banking system are at more than 120% of GDP, an “already high level,” which triggered a warning by the World Bank of potential risks to the system, according to Hong.
Hong added that SBV that will continue to tell banks to cut operational costs to bring down commercial lending interest rates to help businesses. She confirmed the central bank is on track to achieve its credit growth target of 15% this year.
The governor said the State Bank and the finance ministry will step up coordination between monetary policies and fiscal policies and “fiscal policy can be reasonably expanded to avoid relying too much on monetary policy.”
Green finance has risen to about 650 trillion dong ($25.7 billion), of which 45% is for renewable energy and 30% for clean agricultural projects, Hong said. This has increased around 17% per year in the Vietnamese banking system since 2017.
The central bank will continue monitoring the global gold market in order to take appropriate measures, according to Hong. The regulator will pursue its target in narrowing the gap between domestic and international gold prices while being in line with the policy of the anti-speculation of gold, Hong said.
–With assistance from Linh Vu Nguyen and Karl Lester M. Yap.
(Updates with Vietnamese dong in the fourth paragraph.)
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