VietNamNet Bridge – Businesses are “reading between the lines” and assuming that they will not be able to borrow money in foreign currencies from early 2015.

However, there is a ray of hope that the State Bank would allow lending in foreign currencies for some time.

The State Bank of Vietnam’s Circular No 29 on providing loans in foreign currencies will expire on December 31, 2014. From January 1, 2015, only a limited number of borrowers can access foreign currency loans.

Vu Nhat Lam, deputy general director of Ocean Bank, said in Dau Tu newspaper that he noted a significant increase in the number of customers asking for foreign currency loans recently.

Some other bankers also noted that businesses have rushed to borrow capital in dollars recently, trying to obtain loans prior to December 31, the day when the circular expires.

The circular, released in 2013 but taking effect in early 2014, was described as “paving the way for more businesses to access dollar loans”, because it expands the list of subjects that can get dollar loans from banks.

The regulation, plus a stable dong/dollar exchange rate, has prompted businesses to rush to borrow dollars.

A report showed that foreign currency outstanding loans had increased by 20.77 percent by the end of September, which was five times higher than dong outstanding loans.

Thoi bao Kinh te Sai Gon quoted the director of the HCM City branch of the State Bank of Vietnam Nguyen Hoang Minh as noting that a sharp rise in foreign currency loans helped push up credit growth.

However, as the circular will expire soon, lending in foreign currencies will once again be tightened.

The director of a seafood company said he prefers borrowing in foreign currencies because the company can enjoy lower interest rates.

“If lending is tightened, seafood companies will have to borrow in dong, while dong lending interest rates, though having decreased recently, remain relatively high,” he noted.

The official estimates that a medium-size company would be able to save VND50 billion a year if it can borrow in dollars instead of dong.

Both businesses and bankers want the State Bank to extend the deadline for lending in foreign currencies, because they have earned a lot of money from lending in recent months.

While the State Bank has not released any announcement on whether it will extend the deadline, economists have advised the bank to do this.

“Any signs of credit growth, no matter whether it is the dong or foreign currency credit growth, should be seen as good news in the current circumstances,” said Le Xuan Nghia, member of the National Advisory Council for Finance and Monetary Policies.

Kim Chi