'Unleashing' foreign currency lending: Businesses and banks join hands to breathe a sigh of relief!

The State Bank’s decision to lend foreign currency to export enterprises is supported by the market and is believed to increase competitiveness. However, the story of anti-dollarization and foreign currency bleeding is also being discussed.

Businesses and banks join hands to breathe a sigh of relief

It was thought that the mechanism for a group of export enterprises to borrow foreign currency had ended since April 1.

In the past 2 months, the cessation of foreign currency lending has caused many export enterprises to face difficulties as they have to switch to borrowing working capital in VND with higher interest rates, increasing production costs, reducing the competitiveness of export goods, and making businesses even more difficult.

Fortunately, the door has once again opened for these businesses. Governor of the State Bank of Vietnam Le Minh Hung has issued Circular 07 allowing export businesses to borrow foreign currency again starting from June 1 until the end of this year.

This is considered a good sign for both businesses and banks because with the current difficult economic situation, supporting export businesses by lending foreign currency again is completely reasonable.

Economic experts say that psychologically, the above regulation is a great relief for the business community, especially businesses that need to use foreign currency.

Mr. Nguyen Hoang Minh, Deputy Director of the State Bank of Vietnam, Ho Chi Minh City Branch, said that allowing export enterprises to borrow USD again will support export enterprises by banks lending short-term USD, then the enterprises sell USD back to the bank to get VND to buy input materials for export.

In addition, currently foreign enterprises enjoy very low interest rates, so the return of foreign currency loans to domestic enterprises, especially those operating in the import-export sector, will create motivation for domestic enterprises, improve competitiveness, and boost production of export goods.

Should raise the ceiling on USD deposit interest rates?

In any country, when issuing or adjusting a policy, there are two sides, there must be trade-offs, losing one thing and gaining the other.

Reopening foreign currency lending means slowing down the anti-dollarization process. Reopening foreign currency lending will increase the demand for foreign currency in the coming time, creating pressure on the exchange rate in the last months of the year. Therefore, the State Bank must also anticipate scenarios to operate reasonable exchange rate and interest rate policies, ensuring the goal of both controlling inflation and supporting growth.

Two banking and finance experts, Dr. Can Van Luc and Dr. Nguyen Tri Hieu, share the same opinion that the State Bank should consider allowing commercial banks to mobilize USD at the same interest rate as before or at an interest rate higher than 0%. If banks lend low liquidity while all deposits are non-term, this is a credit risk and will certainly increase USD interest rates.

Some experts shared that after imposing a 0% ceiling on USD deposit interest rates, in reality, banks encountered many difficulties in mobilizing, and there were even some banks trying to "evade the ceiling".

This partly proves that policies need to be adjusted and consideration should be given to raising interest rates on USD deposits so that banks can attract capital and create favorable conditions for lending to businesses.

In addition, the US Federal Reserve (FED) may soon increase USD interest rates. If it keeps deposit interest rates at 0%, the story of "foreign currency bleeding" will once again raise many concerns.

According to Tri Thuc Tre