50
increased 3.14% in first quarter of 2009; 4.41% in
quarter second of 2009 ; 5.98% in thirth quarter of
2009; 6.99% in fourth quarter of 2009; Inflation also
fell down to 6.88%.
- Loosening step by step for commercial banks
by allowing to apply negotiable lending interest
rates for medium and long term (Circular No.
07/2010/TT-NHNN issued by the State Bank of
Vietnam on February 26
th
, 2010) and for all types
of loans (Circular No. 12/2010/TT-NHNN, dated
April 14
th
, 2010) with the aim of opening up the
capital market for entrepreneurs.
The return to apply the agreed interest
rate policy between borrowers and lenders
significantly reduced the role of the key rate as it
ceased operating under the interest rate regime
(maximum 150% of the key rate). The base rate
raising from 8% to 9% in November 2010 and
maintaining at 9% until the end of 2012 shows
that the guiding role and reference information
of the basic interest rate became blurred in the
transmission mechanism of interest rates to the
objective of monetary policy.
In theperiod2012-2014, the interest ratehas been
continuously decreasing according to the direction
of the SBV. Besides, the macroeconomic indicators
such as GDP and inflation have improved, which
createdmomentum for banks to continue reducing
interest rates to support businesses to develop their
business, thereby promoting economic growth.
From 2015 up to now, the interest rate ground has
maintained relatively stable with a slight interest
rate reduction in VND.
However, the recent medium and long-term
deposit rates tend to increase as banks need to
use liberalization financing to meet Circular No.
06/2016/TT-NHNN dated May 27
th
, keep USD
interest rates unchanged at 0% and continue
reducing USD lending rates to support economic
growth and anti-dollarization. The deposit rates
at the end of 2017 of some large commercial banks
are increasing, similar to 2016.
As for the exchange rate policy, from March
2015, the exchange rate band has widened +/- 5%
so far, which has aimed at bringing exchange rate
closer to the market signals. On the other hand, the
widening of the VND/USDband is also intended to
create more favorable conditions for exports. The
problem posed in the post-economic downturn
period is that the adjusted exchange rate will have
a positive impact on economy? Band widening or
exchange rate adjustment? Or both?
In essence, widening the band or adjusting the
interbank exchange rate will reduce the value of
the domestic currency, making the VND more
closely reflect the real value. Rather than letting
the band be too large for management, it should
be replaced by an adjustment of the interbank rate.
When USD/VND reaches the expected level, there
will be a wave of USD selling, the VND deposit
will increase, the commercial banks will be able
to lower VND interest rates (both deposit and
lending). This will both affect interest rates and
capital inflows and outflows, while maintaining
the competitiveness of the economy, boosting the
export of goods, actively importing and erasing
the expectation of VND devalued against USD in
the short term.
Solutions for interest rate management
in the coming time
A proper monetary policy will accelerate
the recovery process. In the current period,
the Government and SBV should focus on the
following solutions:
Firstly
, combining capital inflow control and
monetarypolicy objectives. In the current situation,
if the SBV continues to tighten monetary policy
and stabilize the exchange rate by intervening in
the foreign exchange market to maintain its export
potentials, Vietnam must continue to mobilize
foreign capital inflows. This will put SBV under
pressure on buying foreign currencies, affecting
money supply and interest rates. Therefore,
in order to minimize external impacts, the
coordination of controlling foreign capital flows
and the solutions of monetary policy is becoming
more important.
The control of foreign direct investment (FDI)
canbe implemented in linewithChina’s experience
(encouraging FDI into export incentives, creating
technical barriers to non-encouraging investments
such as setting high environmental requirements).
For indirect investment inflows (FPI), up to
now, direct measures that the Government has
taken to control capital inflows into the stock
market are banning the expansion of foreign
investors’ownership in domestic enterprises
