Central bank pledges flexible monetary policy

Deputy Governor of the State Bank of Vietnam Nguyen Thi Hong speaks at the forum.

Hong made the statement during the Vietnam Banking Overview Forum 2019 in Hanoi on May 8. The event aimed to review the monetary policy that has been implemented in recent times as well as the performance of the entire banking system.

She asserted that the 2019 monetary policy aims to stabilize local money and foreign exchange markets, retain macro-economic stability, and spur economic growth. In addition to these benefits, the monetary policy is expected to help increase total payment means and credit by around 13 per cent and 14 per cent, respectively this year. 

The central bank will take on open market operations aimed to regulate the liquidity of credit institutions at a proper level, stabilize the money market, and realize the goals of monetary policy, the official stressed. She added that the central bank will direct a compulsory reserve requirement on par with other monetary policy tools, market developments, and the goals of monetary policy.

Vo Tri Thanh, former Vice Director of the Central Institute for Economic Management, emphasized macro-economic, interest rate, and exchange rate stability as highlights of the banking sector last year. 

The central bank has regulated monetary policy in a sensible manner in recent years, enjoying particular success in monitoring liquidity and inter-bank interest rates in order to stabilize exchange rates amid increasing fluctuations.

Thanh raised concerns regarding the challenges ahead, especially unfavorable developments facing the banking sector in the short term and an upward trend of interest rates due to moves by the Federal Reserve System (Fed).

Meanwhile, ongoing trade tensions between the US and China could pose threat to local exchange rates, thus potentially disrupting the inflation rate and trade balance.

According to the central bank, the fruitful outcomes from realizing the 2018 monetary policy made significant contributions to the implementation of national socio-economic goals set for the 2016-20 period.

Local foreign currency and gold markets enjoyed stability last year while the central bank continued to increase its foreign currency reserves and credit institutions posted their net purchase of foreign currencies.

The state bank reported that credit institutions had handled some VND204.4 trillion (US$8.73 billion) worth of bad debts as of January 31, representing over 40 per cent of the total. By late 2018, the rate of bad debts was reportedly slashed to below 2 per cent.