VINACHEM

The State Bank of Vietnam (SBV) has been taking a series of measures to stop dollarization, but the newly released 2015 financial report shows that the goal is still far away.

When 2016 began, SBV announced the application of the central exchange rate policy, under which the dong/dollar exchange rate is adjusted and made public daily.

The solution aims to help stabilize the foreign exchange market, and prevent short-term speculation. It is described as an effective measure to fight against dollarization.

In the past, the central bank pegged the dong to the US dollar for a long time and then made big adjustments. The dong was devalued by 1 percent or more each time.

As a result, any adjustment caused major influences to the market as speculators exploited the opportunities to sell dollars, while people rushed to buy dollars for fear of further dollar price increases.

The central exchange rate policy is believed to be more flexible, which helps the central bank take the initiative in controlling the exchange rate.

An analyst said that the State Bank wants people to understand that the profits from holding dollars will not be higher than those for Vietnam dong, and therefore, keeping dollars instead of dong is not a wise decision.

SBV also slashed the dollar deposit interest rate to zero percent as part of the plan to fight dollarization. People are expected to stop holding dollars if they cannot make profit with dollar deposits.

However, drastic measures seemingly cannot help.

Former Governor of the State Bank Le Duc Thuy said at a workshop held recently by the National Finance Supervision Council that there exists an imbalance between dong mobilization and lending, and between dollar mobilization and lending.

“The zero percent dollar deposit interest rate cannot persuade people to shift to deposit dong instead of dollars at banks,” he commented.

“The mobilized capital in dollars is still higher than lent, which means that people continue hoarding dollars,” he said.

Truong Van Phuoc, deputy chair of the National Finance Supervision Council, also noted that the goal of the fight against dollarization remains unattainable, while the dollarization rate has increased.

Phuoc cited a report as showing that in 2015, the mobilized capital in dong increased by 16.3 percent compared to 2014, while the figure was 19.3 percent in 2014 compared to 2013.

Meanwhile, the dollar capital mobilized increased by 14.3 percent in 2015, a considerable increase compared with the growth rate of 4.7 percent one year before.

“Vietnam fights against dollarization by exterminating the source of income from dollar. However, people still keep dollars,” he commented.