State Bank’s US deposit interest rate cut curbs dollarisation

The State Bank of Vietnam (SBV)’s surprising decision to cut the interest rates on USD deposits on September 27 was welcomed by economic experts, who said the move was a step towards many goals.

With the decision, the USD deposit interest rate is reduced to zero for organisations and 0.25 percent for individuals as of September 28.

SBV Deputy Governor Nguyen Thi Hong said the decision would increase the value of the Vietnamese dong (VND) and contain the dollarisation of the economy.

Economic expert Dr. Nguyen Minh Phong said the move was new and bold. The decision is a basic step to reduce the motivation for USD deposits for profit from organisations and individuals.

Dr. Nguyen Tri Hieu, a banking-finance expert, said the move reduces dollarisation and pressure on the USD-VND exchange rate.

It is an important decision to stabilise the VND, reduce USD speculation, steady the interest rate ceiling and support economic recovery, he said.

Agreeing with Hieu, General Director of the Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) Le Duc Tho said the SBV decision would help the USD-VND exchange rate and interest rate ceiling remain stable.

For export companies, the news offered them hopes of accessing USD loans at low interest rates.

The decision also eased pressure on the SBV to sell USD, which has been built up by the USD-VND exchange adjustments one month ago, Dr. Phong said.

According to Dr. Phong, the decision could be in preparation for the possibility of an interest rate hike from the United States Federal Reserves by the end of the year.-VNA