SBV has been persistent in anti-dollarization; however, according to many experts, some solutions were somewhat hasty. Therefore, the business community has been pleased, when SBV had listened to companies’ voice and decided to approve foreign currency loans.
Mr. Huynh Quang Thanh, Director of Hiep Long Wood Company (Tan Uyen Town), said since the SBV reinforced Circular No. 24, many companies in the timber industry must borrow VND loans with interest rate from 5 - 8%/year, compared to the USD interest rate of only 2-3%/year, disadvantaging many businesses. Now, SBV allows exporters to borrow dollars to produce, helping exporters to reduce input costs, including interest expenses, and enhance company’s competitiveness. Ms. Truong Thi Thuy Lien, Director of Lien Phat Company (Di An Town), said this decision would help enterprises to reduce financing costs. Due to the current fierce competition, a support for enterprises through this monetary policy of SBV is very timely and rational.
Re-granting foreign currency loans of SBV also expresses the spirit of Resolution 35/NQ-CP on supporting enterprises. Photo: Binh Duong Branch Vietcombank officials tallied USD
According to Circular No. 07/2016/TT-NHNN, a group of subjects, who are exporters, can get a loan in foreign currency. Accordingly, this circular allows credit institutions and foreign bank’s branches to conduct foreign exchange transactions and provide short-term loans in foreign currencies to residents to meet domestic capital needs; to export and trade goods through Vietnamese border gates, when borrowers would have sufficient foreign currencies from export revenues to repay loans. Additional conditions are that borrowers must sell the borrowed foreign currencies to the credit institution, foreign bank’s branch in the form of spot foreign exchange transactions, unless the borrowing requirement of the customer to perform payment transactions in foreign currencies is prescribed by laws.
According to the SBV, the reopening of this mechanism is to support businesses in production, while the overall socio-economic situation is still difficult. In fact, in the first months of 2016, the overall economic growth of the country was lower than the same period last year. In addition, drought and salinization at South Central, Central Highlands, Mekong Delta areas have happened complicatedly, caused unusual incidents in some Central coastal provinces, affecting negatively aquaculture, fishing and marine tourism. Notably, these difficulties happened objectively, beyond foreign currency credit policies identified in late 2015. Therefore, the policy adjustment of the SBV is necessary.
Previously, SBV closed and reopened foreign currency credit two times, because business activities, especially of export companies, were in troubles. Experts believed that in each stage of economic development, despite exchange rate fluctuations and risks, foreign currency credit was a fund with much lower borrowing interest rate than VND interest rate, enabling exporters to minimize costs and enhance competitiveness.
Reported by Thanh Hong – Translated by Ngoc Huynh