Regarding to maximum USD mobilizing interest rate for entities and individuals at 0% p.a, several experts assessed that the application of this policy is one of the important tools for SBV to manage monetary policy for the aim of concretizing the anti-dollarization target of the Government, and to help stabilizing the exchange rate and the foreign currency market.
The State Bank of Vietnam set a ceiling of mobilizing rates in foreign currencies in 2010 to curb dollarization and ease pressure on the domestic currency. Basing on the developments in the foreign exchange market, from 2011 to 2014, SBV continued to adjust the 5-fold the USD deposit rates in line with the reduction of VND rates. Then in December 2015, SBV reduced USD deposit rates to 0% p.a.
Since the maximum USD mobilizing interest rate for entities (excluding credit institutions and foreign bank branches) was adopted at 0% p.a and the maximum USD mobilizing interest rate for individuals was 0% p.a, the rate of dollarization has declined dramatically, down to 8.92%. This downward trend continued with the rate recognized by June 30th, 2017 was just 8.59% - considerably lower than that in developing countries. The position of VND has been continuously strengthened.
According to experts’ general assessment, the application of maximum USD mobilizing interest rate of 0% p.a is one of the important tools in SBV's monetary policy to concretize the anti-dollarization target of the Government; and to help stabilizing the exchange rate and the foreign currency market.
In recent years, SBV has been very consistent in managing exchange rate policy, stabilizing interest rates, and low inflation ... so that people can be more assured about the value of national currency - VND. Instead of keeping the USD and other assets for the purpose of hoarding, people have "converted" into VND to save with better interest rates. Therefore, over time SBV has bought a large amount of foreign currencies from the market, strengthening national forex reserves to reach the highest level in record.
In fact, with the current market conditions, the USD mobilizing interest rate of 0% p.a policy is still having positive effects; the exchange rate and the forex market are moving smoothly.
SBV confirmed that it will continue to closely monitor developments in the monetary market and macro economy in order to flexibly regulate the USD interest rate in line with the overall policy instruments to maintain the macroeconomic stability.
At the same time, SBV continues to operate synchronously and flexibly monetary policy instruments in close coordination with fiscal and other macroeconomic policies to ensure macroeconomic stability, to manage inflation under the direction of the Government. Especially, the management of interest rates will ensure a reasonable benefit of holding VND to continue improving the position of VND; Continue operating the exchange rate in a flexible manner on the basis of reference to the changes in the inter-bank foreign currency market, international market exchange rates, macroeconomic balances... Persistently carry out the transfer of mobilization - lending to buying and selling foreign currency, anti - dollarization in accordance with the policy of the Government.
VA