The State Bank of Vietnam has announced its plan to order majorState-owned economic groups and corporations to sell 376 million USD inUS dollar reserves to the commmercial banking system next week in orderto reduce the accumulation of dollars in the economy.
"The deposits of these corporations are obviously accumulative," StateBank Governor Nguyen Van Giau told the Government's press conference onMarch 30, noting that 78 economic groups, corporations and enterprisesheld over 1.6 billion USD in US dollars on deposit, including 376million USD in term deposits in March.
"Banks need those dollars to sell to enterprises with legitimate need," Giau said.
The March 30 announcement was the latest in a series of measures takenby the central bank in the past two months to try to regain control ofunstable foreign exchange markets and to ease the downward pressure onthe value of the Vietnamese dong – forces which have resulted in severalcurrency devaluations, higher inflation and a widening trade deficit.
Consumer prices surged 13.89 percent in Marchcompared to a year earlier, the fastest year-on-year pace since Februaryof 2009, the General Statistics Office announced. Meanwhile, the tradedeficit widened to 1.15 billion USD in March from a revised 1.11 billionUSD a month earlier.
The last time the central bankordered State-owned enterprises to sell dollars back to commercialbanks, the order was intended to ease a shortage in the dollar supply, asituation that had increased tension on both official and black forexmarkets.
This time, by contrast, the order came at atime when the commercial banking system has plenty of dollars on handand has been lowering deposit interest rates.
"Iknow that dollar sources are plentiful at many banks at this time," amember of the executive board of a State-owned bank in Hanoi toldVietnam News on condition of anonymity. "But the dollar sale instructionnow, together with other measures, aims to absorb excess liquidity,restrict accumulation and bolster the dwindling foreign reserves."
Foreign reserves have slid from a level of nearly 24 billion USD atthe end of 2008 to only about 12 billion USD currently, some foreignfinancial institutions have estimated.
To restrictthe use of dollars in transactions, Giau also affirmed that the centralbank was considering proposals that would allow banks to charge fees ondollar sales.
"The fee should be seen as a tool to discourage people to hold and spend dollars," Giau said.
The long love affair of the Vietnamese public with the greenback hascaused numerous economic and social problems and interfered witheffective policy management in recent years.
Earlierthis month, Tran Du Lich, former head of HCM City Economic Institute,said Vietnam should follow the lead of other countries and impose alarge gap between buy and sell rates so that people would only buydollars for which they had an actual need.
NationalMonetary Policy Advisory Council member Tran Hoang Ngan advised that thecentral bank should cap the fee but otherwise allow banks to fix itbased on supply and demand. /.
"The deposits of these corporations are obviously accumulative," StateBank Governor Nguyen Van Giau told the Government's press conference onMarch 30, noting that 78 economic groups, corporations and enterprisesheld over 1.6 billion USD in US dollars on deposit, including 376million USD in term deposits in March.
"Banks need those dollars to sell to enterprises with legitimate need," Giau said.
The March 30 announcement was the latest in a series of measures takenby the central bank in the past two months to try to regain control ofunstable foreign exchange markets and to ease the downward pressure onthe value of the Vietnamese dong – forces which have resulted in severalcurrency devaluations, higher inflation and a widening trade deficit.
Consumer prices surged 13.89 percent in Marchcompared to a year earlier, the fastest year-on-year pace since Februaryof 2009, the General Statistics Office announced. Meanwhile, the tradedeficit widened to 1.15 billion USD in March from a revised 1.11 billionUSD a month earlier.
The last time the central bankordered State-owned enterprises to sell dollars back to commercialbanks, the order was intended to ease a shortage in the dollar supply, asituation that had increased tension on both official and black forexmarkets.
This time, by contrast, the order came at atime when the commercial banking system has plenty of dollars on handand has been lowering deposit interest rates.
"Iknow that dollar sources are plentiful at many banks at this time," amember of the executive board of a State-owned bank in Hanoi toldVietnam News on condition of anonymity. "But the dollar sale instructionnow, together with other measures, aims to absorb excess liquidity,restrict accumulation and bolster the dwindling foreign reserves."
Foreign reserves have slid from a level of nearly 24 billion USD atthe end of 2008 to only about 12 billion USD currently, some foreignfinancial institutions have estimated.
To restrictthe use of dollars in transactions, Giau also affirmed that the centralbank was considering proposals that would allow banks to charge fees ondollar sales.
"The fee should be seen as a tool to discourage people to hold and spend dollars," Giau said.
The long love affair of the Vietnamese public with the greenback hascaused numerous economic and social problems and interfered witheffective policy management in recent years.
Earlierthis month, Tran Du Lich, former head of HCM City Economic Institute,said Vietnam should follow the lead of other countries and impose alarge gap between buy and sell rates so that people would only buydollars for which they had an actual need.
NationalMonetary Policy Advisory Council member Tran Hoang Ngan advised that thecentral bank should cap the fee but otherwise allow banks to fix itbased on supply and demand. /.
