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Vietnam central bank to continue fight against dollarisation
HANOI: The State Bank of Vietnam should continue to take measures against dollarisation and goldenisation in the domestic economy as the markets remain potential risks to rising speculation and hoarding of assets, experts say.
In recent years, dollarisation and goldenisation have been strictly controlled in the country, which has helped to stabilise the Vietnamese dong and fight inflation.
According to experts, the dollarisation of the Vietnamese economy has fallen sharply, from more than 20% before 2010 to more than 10% after 2010.
With the policies of consistently controlling inflation and stabilising exchange rates, interest rates of dong denominated deposits are always higher than those on US dollar-denominated deposits, which has encouraged people to convert the dollar into dong and deposit at banks to get higher profits.
The interest rate for US dollar-denominated deposits is currently 0%, compared with 8% to 10% per year for dong-denominated deposits.
Despite the success, Vietnam still needs to continue to have policies to regulate the market because the market still has factors affecting the goal of limiting dollarisation in the economy.
Economist Do Duy Cuong said the increase in dollarisation would make the foreign exchange market unstable, which would cause a trade deficit and inflation to increase and negatively impact confidence in the national currency.
The country’s foreign exchange reserves would also be reduced.
Cuong said it was necessary to continually stabilise the dong’s value and use monetary policy tools to influence market conditions so as to make the dong more attractive than the dollar. — Viet Nam News/ANN