Deposit interest rates in both Vietnamese and foreign currencies are expected to be cut this month, according to the Vietnam Association of Finance Investors (VAFI).

Because the domestic banking sector is currently finding it easier to mobilise capital, particularly foreign currencies, the State Bank of Vietnam (SBV) should adjust deposit interest rates, the association said.

The organisation proposed cutting interest rates to 3 or 3.5 percent per annum for foreign-currency deposits.

VAFI general secretary Nguyen Hoang Hai said that a drop in the interest rate of foreign-currency deposits would quickly lower the interest rates on Vietnamese dong deposits. In addition, it would also narrow the gap between the exchange rate of the Vietnamese dong and US dollars between the official and unofficial markets.

Hai said the SBV should reconsider the current policy of providing foreign-currency loans for enterprises to buy materials to produce export goods.

Since the second quarter of 2010, the central bank has allowed enterprises involved in export production to borrow US dollars and use them as working capital.

Explaining the policy change, the central bank said that many commercial banks had not disbursed all of their foreign-currency deposits, and the market had experienced a shortage of US dollars.

If export enterprises were given foreign-currency loans, they would have more opportunities to increase their production and export activities, earning more dollars to pay debts, the central bank said.

As a result, many export enterprises had borrowed foreign currency, thus increasing the volume of the banks' foreign-currency credits significantly, Hai said.

To generate more US dollars to meet this demand, many banks had to raise foreign-currency deposit interest rates, he added./.