VINACHEM

Vietnam has raised interest rates for the second time in less than three weeks, a move which analysts say shows a stronger commitment to fighting rampant inflation.

The State Bank of Vietnam (SBV), in a notice issued late Tuesday, said its refinancing rate had risen to 12 percent. That followed an increase on February 17 to 11 percent from nine percent.

In its latest action the central bank also lifted its discount rate to 12 percent, from seven percent, but left the base rate at nine percent.

"The gradual tightening of monetary policy indicates that both the SBV and the government are clearly (if belatedly) targeting a reduction in inflation by de-prioritising economic growth," Daiwa Capital Markets said in a briefing note.

ANZ Bank added the latest rate increases show "that the authorities are now acting more aggressively and proactively against inflation."

Although the base rate has been Vietnam's traditional policy tool it is more of a "signal", but perhaps has not fulfilled its role, said Vishnu Varathan, Singapore-based economist at Capital Economics consultancy.

He told AFP the increase in the refinancing rate sends a very clear message that commercial banks will have to prioritise where they channel financing.

He said this backs up a central bank directive last week that, among other measures, seeks to limit the proportion of loans for "non-productive sectors", notably property and stocks.

Higher refinancing rates increase the cost for banks that borrow from the central bank to supplement their capital, while the discount rate applies to more urgent borrowing.