The State Bank of Vietnam will continue to allow credit institutions togive loans in foreign currencies to export companies and petrolwholesalers till the end of 2015.
Several people had thought that the SBV will stop the practice by the end of 2014.
SBV'sDeputy Governor Nguyen Thi Hong spoke to the press about the matter,ahead of the issuance of a new circular to replace Circular No29/2013/TT-NHNN on loans in foreign currencies.
*Several peoplethink that credit institutions will be stopped from giving loans inforeign currencies to export companies and petrol wholesalers byDecember 31, 2014, with the Circular No 29/2013/TT-NHNN. Is it true?
It is not true that lending in foreign currencies will be stopped after December 31, 2014.
Accordingto Circular No 29, which came into effect on January 1, 2014, creditinstitutions are allowed to provide short-term, medium-term andlong-term loans in foreign currencies to help the borrowers makeoffshore payments for the import of products and services. The circularregulates several major government projects that need evaluation of loandemands and approvals by the central bank.
During 2013-14,businesses were still facing difficulties and the credit demand was low.To help the businesses tackle their difficulties, the central bank hasallowed lenders to have the right to decide loans in foreign currenciesfor two activities, which are the production of export products andpetrol imports by wholesalers. Circular No 29 said that this will beimplemented till the end of December this year.
The central bankrecently studied the demand for loans in foreign currencies for the twoactivities and found that their outstanding foreign currency loansaccount for 30 percent of the total outstanding loans in foreigncurrencies.
Among them, the outstanding loans in foreigncurrencies for the production of export products comprise 24 percent,and for petrol imports six percent. These figures are modest.
In2015, the National Assembly set an economic growth target of 6.2percent. The State Bank of Vietnam sees that several support measuresare required to achieve this goal. Accordingly, the central bank willextend the deadline for foreign currency loans by credit institutionsfor the two activities till the end of next year.
The centralbank will ask credit institutions to submit reports about foreigncurrency credits to control the foreign exchange market and ensuremarket security, however.
*What will be the impact of theextension of the deadline for loans in foreign currencies on businesses,lenders and the economy?
With stable exchange rates, the loaninterest rates in Vietnamese dong being higher than in foreigncurrencies, the extension of the deadline for loans in foreigncurrencies will help businesses to reduce their interest expenses.
This will also help banks to raise their credit growth targets.
Thisis one of the measures to help achieve the goal of 6.2 percent growthnext year, as business will benefit from loans given in foreigncurrencies and import and export will be promoted.
*Do you thinkthat the loans in foreign currencies for export companies and petrolimport firms will put pressure on the foreign exchange market, as thedemand for foreign currencies rises?
There are many factorswhich will impact the foreign exchange market. However, the mostimportant factor is the supply and demand.
The lending inforeign currencies for the two above-mentioned activities might helpease the demand for buying foreign currencies.
Regarding loansin foreign currencies for export, the concerned companies will haverevenue in foreign currencies to repay their loans.
Regardingloans for petrol import, wholesalers will not have revenue in foreigncurrencies. However, their outstanding loans in foreign currenciescomprise a mere six percent.
As a result, the lending in foreign currencies for these two activities will not have huge impacts on the forex market.
TheState Bank of Vietnam also agrees that loans in foreign currenciesshould be given for several key government projects. However, any suchloan will be carefully considered, based on the solvency of the firm.
An official document to replace Circular No 29/2013/TT-NHNN will be issued no later than next week.-VNA
Several people had thought that the SBV will stop the practice by the end of 2014.
SBV'sDeputy Governor Nguyen Thi Hong spoke to the press about the matter,ahead of the issuance of a new circular to replace Circular No29/2013/TT-NHNN on loans in foreign currencies.
*Several peoplethink that credit institutions will be stopped from giving loans inforeign currencies to export companies and petrol wholesalers byDecember 31, 2014, with the Circular No 29/2013/TT-NHNN. Is it true?
It is not true that lending in foreign currencies will be stopped after December 31, 2014.
Accordingto Circular No 29, which came into effect on January 1, 2014, creditinstitutions are allowed to provide short-term, medium-term andlong-term loans in foreign currencies to help the borrowers makeoffshore payments for the import of products and services. The circularregulates several major government projects that need evaluation of loandemands and approvals by the central bank.
During 2013-14,businesses were still facing difficulties and the credit demand was low.To help the businesses tackle their difficulties, the central bank hasallowed lenders to have the right to decide loans in foreign currenciesfor two activities, which are the production of export products andpetrol imports by wholesalers. Circular No 29 said that this will beimplemented till the end of December this year.
The central bankrecently studied the demand for loans in foreign currencies for the twoactivities and found that their outstanding foreign currency loansaccount for 30 percent of the total outstanding loans in foreigncurrencies.
Among them, the outstanding loans in foreigncurrencies for the production of export products comprise 24 percent,and for petrol imports six percent. These figures are modest.
In2015, the National Assembly set an economic growth target of 6.2percent. The State Bank of Vietnam sees that several support measuresare required to achieve this goal. Accordingly, the central bank willextend the deadline for foreign currency loans by credit institutionsfor the two activities till the end of next year.
The centralbank will ask credit institutions to submit reports about foreigncurrency credits to control the foreign exchange market and ensuremarket security, however.
*What will be the impact of theextension of the deadline for loans in foreign currencies on businesses,lenders and the economy?
With stable exchange rates, the loaninterest rates in Vietnamese dong being higher than in foreigncurrencies, the extension of the deadline for loans in foreigncurrencies will help businesses to reduce their interest expenses.
This will also help banks to raise their credit growth targets.
Thisis one of the measures to help achieve the goal of 6.2 percent growthnext year, as business will benefit from loans given in foreigncurrencies and import and export will be promoted.
*Do you thinkthat the loans in foreign currencies for export companies and petrolimport firms will put pressure on the foreign exchange market, as thedemand for foreign currencies rises?
There are many factorswhich will impact the foreign exchange market. However, the mostimportant factor is the supply and demand.
The lending inforeign currencies for the two above-mentioned activities might helpease the demand for buying foreign currencies.
Regarding loansin foreign currencies for export, the concerned companies will haverevenue in foreign currencies to repay their loans.
Regardingloans for petrol import, wholesalers will not have revenue in foreigncurrencies. However, their outstanding loans in foreign currenciescomprise a mere six percent.
As a result, the lending in foreign currencies for these two activities will not have huge impacts on the forex market.
TheState Bank of Vietnam also agrees that loans in foreign currenciesshould be given for several key government projects. However, any suchloan will be carefully considered, based on the solvency of the firm.
An official document to replace Circular No 29/2013/TT-NHNN will be issued no later than next week.-VNA
