VietNamNet Bridge - Current monetary policies and the strong rise of the stock market have prompted people to pour money into production and investments.

The VN Index keeps increasing

Governor of the State Bank (SBV) Le Minh Hung, answering queries from NA deputies late last week, said that a large amount of the public’s capital in gold and dollars have been put into production and investment.

Hung once again said that Vietnam still can take full advantage of the public’s huge capital in gold and dollars, and there is no need to accept gold and dollar deposits. 

With reasonable management, which stabilizes the macroeconomy and strengthens the value of the Vietnam dong, the government can encourage people to use capital for production and business and for daily consumption. 

In recent years, some economists have repeatedly urged SBV to allow commercial banks to accept deposits in gold and dollars, or the huge capital will be wasted.

Banks once mobilized capital in gold and dollar many years ago. However, SBV stopped the deposits by setting the ceiling deposit interest rate of zero percent because it believed it brought uncertainties. This means that people still can leave gold and dollars at banks but they cannot enjoy the deposit interest rate.

As foreign currencies are not used to import gold, they can be used for production and business. As such, the huge capital in the public can be mobilized indirectly.

Hung said many years ago Vietnam often had to spend foreign currencies to import gold, but now does not have to do this to keep the gold market stable. As foreign currencies are not used to import gold, they can be used for production and business. As such, the huge capital in the public can be mobilized indirectly.

He said that a large volume of gold and foreign currencies has been converted into Vietnam dong and put into business.

In the past, when banks mobilized and lent gold, the amount of gold in the banking system once reached 160 tons. The figure dropped to 32 tons by the end of 2013 (when the policy on zero percent interest rate took effect), and to 2.89 tons by June 2017.

This means that a large amount of gold has been put into circulation to satisfy consumption demand. 

As for foreign currencies, Hung said that in 2016, Vietnam’s balance payments witnessed a surplus of $5 billion, but the State Bank could make a net purchase of $9 billion. This means that a large amount of foreign currencies have been taken out of personal coffers by people and sold in the market. The central bank bought the currencies to increase forex reserves.

The surplus of the balance payments in the first nine months of 2017 was $4.8 billion, but the State Bank could buy $6 billion.