VietNamNet Bridge - The State Bank of Vietnam (SBV) has vowed to tighten the foreign exchange market as it has been doing with the gold market. 

 

SBV has vowed to tighten the foreign exchange market as it has been doing with the gold market.

SBV’s Governor Nguyen Van Binh has recently reaffirmed the central bank’s policy to fight against dollarization, saying that the dollar lending-borrowing relation will be gradually replaced by buying-selling transactions.

“We have succeeded with the ‘goldenization’,” he said, meaning that the management over the foreign exchange market will also be tightened in the way the central bank has done with the gold market.

“Businesses’ and individuals’ rights of holding foreign currencies are protected. However, all institutions and individuals must use the dong in Vietnamese territory,” he said. “You have legal incomes in dollar, but you pay in dong.”

Nguyen Van Vinh, director of Sai Gon Sim, said he was worried about the new policy which may be applied in 2016.

“With the zero interest rate and fee, dollar depositors will take losses,” he said.

“If the policy is applied, we will have to think of other measures to avoid losses,” he added. “We may shift to use cash or buy gold. However, I will do this as the last resort.”

Dang Thi Thu Hoai in Ha Dong district in Hanoi said the new policy, if applied,would badly affect her business. Hoai is now a distributor of cosmetics and nutrition products imported from Russia and the US. Therefore, she needs dollars in cash to make payments four to five times a month.

SBV’s Governor Nguyen Van Binh has recently reaffirmed the central bank’s policy to fight against dollarization, saying that the dollar lending-borrowing relation will be gradually replaced by buying-selling transactions.

“Now I make dollar demand deposits at banks. If banks collection fee on my deposits, I would have to raise the selling prices of products, especially when the dollar is forecast to appreciate,” she said.

Hoai said raising the selling prices is not a good choice, because the competition in the market is stiff, but if she doesn’t do this, she will incur losses.

“The central bank should rethink the policy. It would be better to collect fees on big deposits only,” she said.

Hoang Tuan Vu, the owner of a wooden furniture production workshop in Ha Tinh province, said he was shocked to hear about the proposed policy.

The businessman believes that the current dollar deposit interest rate of 0.25 percent is ‘very small’, but it still can help encourage businesses and individuals who have incomes in dollars to deposit at banks, which helps to avoid dollar speculation.

“I think businesses and people will be against the policy,” he said.

However, he admitted that he would still have to deposit dollars at banks even though he has to pay a fee because he needs dollars to make regular payments for imports.