SBV Should Reduce Administrative Policies, Economist Says

Diep Nguyen

17:25 20/05/2019

BizLIVE -

The SBV has done remarkably good job in maintaining the credit system. In recent years, the economy grew more than 7% but the credit growth was just 14%.

SBV Should Reduce Administrative Policies, Economist Says
Over the past weekend, the yuan/USD exchange rate got the world attention. It reminds people of the yuan exchange rate fluctuation one year ago, at that time, the record devaluation of yuan stumbled the world financial markets, the VND/USD exchange rate also moved sharply.
After many months of stablizing from the final months of 2018 to the end of first quarter 2019 when 1 USD is equal to approximately 6.72 yuan, since the end of April, the yuan started the new devaluation cycle. By the end of the past week, it took 6.92 yuan to exchange for 1 USD.
This fluctuation is the evitable result of US – China trade war and the tarriff retaliations from both sides. Vietnam has close economic and trade relation with both US and China thus Vietnam has many headaches in dealing with the exchange rate matter.
In the recent talk with Bizlive, former President of Ho Chi Minh City Institute of Economics, member of Economic Advisory Group for the Prime Minister, economist Tran Du Lich recalled the success of the State Bank of Vietnam (SBV) in managing the monetary policy.
From Lich’s data revealed by the VAMC, the bank’s bad debt is less than 2%. If we include the debt sold to VAMC and hidden debt, the general bad debt is more than 5%. This bad debt solving process must be continued, Lich stressed.
In recent time, the matter of cross holding in the banking system is tackled as well. In order to fulfill Basel 2, some banks have reached this target ahead of time after a long time of pausing. The SBV has strongly interfered into this process, in which SBV cap the interest rates and lending quotas. Those administrative policies go against the market but must be done under that circumstances.
The SBV has done remarkably good job in maintaining the credit system. In the previous periods, in order to have the 6 -7% of economic growth rates, it was mandatory to have the 23-25% credit growth rates.
But in recent years, the economy grew more than 7% but the credit growth was just 14%. That means the credit quality has become much better compared to the previous time. Inevitably, it is unreasonable to deny the role of the capital market.
Lich thinks that it is now the time to reduce the administrative policies to turn to more market directed policies. When the internal abilities of some commercial banks have improved, SBC should let them be more active in mobilizing capital and lending. SBV uses other indirect tools to prop up the economy.

DIEP NGUYEN

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