Deputy General Director of the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) Pham Thanh Ha spoke with Vietnam Business Forum on the exchange rate from now until the end of 2013.

* How do you assess the policy of the exchange rate adjustment of the State Bank of Vietnam from early 2013 until now?

The USD/VND exchange rate adjustment policy of the State Bank of Vietnam (SBV) from early 2013 to date has achieved two important goals: stabilising the exchange rate and increasing the national reserves. The stabilisation of the exchange rate from the first to the second quarter of this year has increased market volatility, but the SBV had taken timely actions to intervene and stabilise the market. The volatility is still within the targets set by the SBV at the beginning of 2013, which aim to maintain the exchange rates at the stable range from 2 to 3 percent. During the period of fluctuating exchange rates in the first and the second quarter of 2013, the SBV made a lot of effective solutions to regulate the market.

Specifically, on June 28, the SBV adjusted the average inter-bank rate from 20,828 VND to 21,036 VND a USD (increasing by 1 percent). The adjustment rate is very timely and appropriate, accelerating the market liquidity as well as actively supporting exports. After the move to increase the average inter-bank rates, the SBV also increased the adjusted listed exchange rates of buying foreign currencies from 20,850 VND to 21,100 VND a USD to keep up with market fluctuation.

Along with the right responses, the SBV also bought a large number of foreign currencies to increase the national reserves of foreign exchange. Vietcombank has sold its foreign currencies to the SBV, at an estimated amount of 2.1 billion USD so far this year.

Besides, the SBV also conducted other comprehensive solutions such as adjustment of the interest rate in VND and USD and provisions of regulations on foreign currency trading and gold trading to stabilise the foreign currency market.

* What positive impacts have the stabilisation of the exchange rate made on the economy of Vietnam since the beginning of the year?

The stability of the exchange rate from the beginning of the year so far has been a great success in the administration of monetary policy of the SBV and this has made a positive impact on the economy.

First, stabilising the exchange rate has made an important contribution to the maintenance of macroeconomic stability, strengthening the confidence of businesses and people in the VND, enabling businesses to actively plan and adopt their business plans, minimising speculating and hoarding of foreign currencies in order to keep the exchange rate basically stable. The supply and demand of the foreign currency over time are relatively balanced, the foreign currency demand of enterprises and individuals is met. Besides, the national reserves of foreign currencies of the SBV have increased as described above.

Second, due to the stability of the exchange rate and the foreign exchange, confidence in the domestic currency is improved, and although VND deposit rates have been stable, even decreasing at some periods, the amount of VND deposits in commercial banks is still high.

Third, the stability of the exchange rate has also significantly gained the confidence of foreign investors. FDI disbursement has increased recently, which helps improve the balance of payments and will probably lead to a fairly large surplus at the end of this year.

Finally, the stability of the exchange rate and the foreign exchange market activities operated under the framework are among the important factors contributing to the mitigation of dollarisation in Vietnam. With these strict and comprehensive measures to manage foreign currency and gold trading of the SBV in 2013, the shifting trend from the foreign currency deposits to VND deposits has become stronger, and the relations between lender and depositors has gradually blurred to be replaced by the relations of buyers and sellers, thereby contributing to reversing the dollarisation of the economy.

* Will the State Bank of Vietnam make any upward adjustment of the exchange rate from now to the end of this year? If so, how will it affect the economy?

Typically, at the end of the year, demand for foreign currencies tends to rise; accordingly, the foreign exchange tends to rise slightly. However, according to the macro assessment, the trade deficit is still low while the other foreign exchange sources of the economy such as foreign direct investment and remittances remain stable. It is forecast that the balance of international payments of Vietnam from now to last months of 2013 will continue show a surplus, and a surplus is expected for the whole year 2013. Thus the pressure on the exchange rate at the end of the year will not be high.

The facts of Vietcombank show that the changes in supply and demand remain stable and the seasonal factors are not clear. Up to now, Vietcombank still has reasonable demand for foreign currencies of the customers and additionally, sell the foreign exchanges to the SBV.

According to the forecast, stability will be maintained in the near future. If the SBV continues promoting the successes of the market operation by its strict and flexible policies, I believe that the targets of stabilising the exchange rate and foreign exchange market of the SBV this year are entirely feasible, and supportive of economic growth as well as exporters.-VNA