SBV Should Reduce Loan Interest Rates in the Medium Term to Support Companies

Diep Nguyen

17:04 20/05/2019

BizLIVE -

In order to support companies to increase competitiveness, promote export, attention should be given to loan interest rates and credit growth rates.

SBV Should Reduce Loan Interest Rates in the Medium Term to Support Companies
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 said that in any circumstances, Vietnam must not devaluate the Vietnam dong sharply and must not peg the Vietnam dong’ exchange rate to yuan. 
In order to support companies to increase competitiveness, promote export, attention should be given to loan interest rates and credit growth rates. Lich thinks that in the medium term, policymakers should think of the ways to redure loan interest rates.
There is undeniable fact that currently people deposit money into the banks to earn some profits, this creates obstacles for companies. When people see that depositing money is much better than investing, this will affect investment in the economy and create adverse effects.
According to Lich, when we want to assess the credit policy or moneytary policy, it is better to look through the whole process rather than just the current policies. Vietnam has successfully managed the moneytary policy to avoid the breaking down risk in the period from 2011 to 2013, during those time, bad debt rate used to surge to 17 – 18% of total credit amount, some credit institutions faced to the danger of insolvency.
This period is extremely sensitive as the role of the state was very strong. The state has done ell in ensuring people’s trust in the system to avoid the herd psychology. The credit institution system was like the series of dominoes in which one’s falling could lead to whole tragic collapse.

DIEP NGUYEN

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