The State Bank of Vietnam (SBV), or the central bank, has recently pumped VND10 trillion (US$625 million) into the economy through its open market tools to cool down the monetary market, said Nguyen Ngoc Bao, head of the SBV’s Monetary Department.
The move is aimed to ease Vietnam dong (VND) interest rate, but overnight rate in inter-bank market remained high at 10.5 per cent per year November 26, Bao said.
The overnight rate shot up to about 12 per cent in mid-November, prompting the Bank for Agriculture and Rural Development (Agribank) to offer a one-week lending rate at 17 per cent, the highest rate ever on local monetary market.
Several banks are facing deposit rate 20-60 basis points higher than previously and are bidding for more dong fund.
The current dong liquidity crunch is attributed to the central bank’s overreaction to the increased inflation. As of early October, the SBV soaked up 80 per cent of the money that was injected into the economy in earlier months.
In the first half of this month, the central bank absorbed an additional VND1 trillion (US$62.5 million), Bao said.
The sudden shortage of dong is resulted from a surge in payment demands by enterprises, not from excessive withdraws, he said, adding that similar situation had occurred in December of previous years.
In recent years, there is an increasing demand for disbursement of enterprises in late months of the years, which impacts on available capital of commercial banks and pushes up inter-bank interest rate.
The supply of VND10 trillion will not hike inflation rate because the SBV only helps commercial banks with capital for short-term payment in order to ease the monetary market, Bao said.
The SBV will keep a close watch on the market for the rest of the year in order to make timely intervention, if necessary, Bao said. (SGT, Vietnam Economic Times)
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