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Vietnam central bank eyes more flexible monetary policy in 2nd half

Publication Date : 10-07-2014

 

State Bank of Vietnam Governor Nguyen Van Binh is planning a more flexible monetary policy in the second half of this year to enable the country to achieve credit growth of 12 to 14 per cent by the end of the year.

At a conference held by the central bank yesterday, Binh said total credit in the first half of the year grew by only 3.52 per cent.

The low credit growth, which has stirred concerns in recent weeks, was blamed on weak capital absorption capacity of the economy, unsolved budget debts and the tedious process of handling collaterals along with the loan underwriting mechanism for enterprises.

In the second half, Hanoi will focus on managing bad debts, raising total demand and facilitating market recovery.

Policy makers said credit demand in the second half was always twice than that of the first half. They expressed optimistic provisionary views over the entire year's target of 12 to 14 per cent credit growth.

Earlier, a report by the Monetary Policy Department showed that roughly 87 to 90 per cent of capital resources of banks went to government bonds and state treasury bills.

The central bank yesterday said bond and bill purchases would help credit institutions raise theirliquidity position. However, they warned that the banks' holdings might cause some difficulty if banks would not be able to balance the tenures.


In terms of credit structures in the first half, credit increased by 10 per cent for exports, 5.8 per cent for auxiliary industries and 13 per cent for hi-tech applied production firms. Meanwhile, small and medium sized enterprises posted a 2-per cent increase in credit.

As of May, 2014, loans allocated for agriculture and rural areas were up by  2.56 per cent against the end of 2013.

Dong liquidity was secured. Loan-to-deposit ratio (LTD) in the dong came down to 87.4 per cent from 92.5 per cent in December last. (The LTD ratio indicates a bank's liquidity. If the ratio is too high, it means that banks might not have enough liquidity to cover any unforeseen fund requirements and if the ratio is too low, banks may not be earning as much as they could be.)

By the end of June, the foreign exchange reserves were US$35 billion.

The ratio of dollar deposit-to-total money supply was 11.4 per cent, slightly down from 12.4 per cent by the end of last year.

 

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