Following the directions of the Government and the Prime Minister at Directive No. 11/CT-TTg dated March 4, 2020, Resolution No. 41/NQ-CP dated April 9, 2020, and Decision No. 15/2020/QD-TTg dated April 24, 2020, the State Bank of Vietnam (SBV) has been implementing timely and effective management measures in order to remove the difficulties, promote the recovery of production and business operations, support the economy, and mitigate the impacts of the Covid-19 pandemic. Recently, the SBV has announced adjustments of the key interest rates, effective from May 13, 2020. To disseminate more information on this move, Mr. Pham Thanh Ha – Director General of the SBV Monetary Policy Department – has granted the press an interview about the recent interest rate reductions. Below is the full text of the interview.
Correspondent: Could you tell us the reasons why the State Bank of Vietnam continues to reduce the interest rates?
Mr. Pham Thanh Ha: Following the directions of the Government and the Prime Minister at Directive No. 11/CT-TTg, Resolution No. 41/NQ-CP, and Decision No. 15/2020/QD-TTg, the State Bank of Vietnam (SBV) has been implementing timely and effective management measures in order to remove the difficulties, promote the recovery of production and business operations, support the economy, and mitigate the impacts of the Covid-19 pandemic.
The consistent view of the SBV in managing the monetary policy is to ensure liquidity for the credit institutions in order to provide capital to the economy, support to reduce the interest rates in the current period based on proper considerations of appropriate macroeconomic fundamentals, the inflation control target and the credit institutions’ operational safety.
Accordingly, following the interest rate reductions in March 2020, with a view to further supporting the businesses and the people, reducing the costs of borrowing, the SBV has decided to reduce the operating interest rates, the interest rate cap applied to VND deposits for terms of less than 6 months, and the interest rate cap applied to short-term loans in VND in the priority areas.
Correspondent: How do you assess the impacts of the interest rate adjustments?
Mr. Pham Thanh Ha: The interest rates are adjusted on the basis of evaluating the international market developments; a lot of Central Banks have been implementing quantitative easing measures, cutting sharply the interest rates to help the economy to overcome the recession; within Vietnam, the macro-economic foundation has further helped create room for the SBV’s monetary policy management in the context of stable money and foreign exchange markets, the inflation is likely to be controlled within the set target, the economic growth has been negatively affected by the Covid-19 pandemic.
The SBV's decision to reduce all of the interest rates, together with its drastic directions for the credit institutions to cut down on their expenses and profitability, will continue to create favorable conditions for the credit institutions to reduce the lending rates in a sustainable manner in the near future, contributing actively to remove the difficulties for the economy.
Correspondent: What are the SBV’s management orientations in the coming time?
Mr. Pham Thanh Ha: In the coming time, the SBV will continue to closely monitor the developments of the domestic and the foreign markets, the results of implementing the measures to manage the monetary and the interest rate policies. On that basis, the SBV will proactively and flexibly implement the monetary policy solutions in order to control the inflation, stabilize the macro-economy, ensure the liquidity and the operational safety of the credit institution system, and supporting the economic growth.
VA