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SBV to persist with exchange rate policy

Update: December, 18/2014 - 09:20
A source from the central bank told the Thoi Bao Kinh Te Viet Nam that dong depreciation, if it occurs, will not be higher than 2 per cent next year. — Photo vtv

HA NOI (VNS) — The State Bank of Viet Nam (SBV) is expected to continue its current exchange rate stabilisation policy next year following the hefty benefits it derived from the strategy this year.

The present exchange rate stabilisation policy has amassed a considerable surplus of US$8 billion in the general balance. To date, the detailed policy for next year has yet to be revealed. However, SBV Governor Nguyen Van Binh has thus far affirmed that the exchange rate of the Vietnamese dong against the US dollar next year will be managed flexibly to ensure the value of dong and increase the national foreign currency reserves.

A source from the central bank told the Thoi Bao Kinh Te Viet Nam that dong depreciation, if it occurs, will not be higher than 2 per cent next year.

The exchange rate policy next year will have insignificant changes compared with that of the past four years, the source said. The central bank employee added that the rate will accordingly fluctuate within 2 per cent, which also occurred in 2011-13. The rate has thus far adjusted up by 1 per cent this year. Moreover, the central bank has pledged to keep the rate unchanged until the end of this year.

Experts said that maintaining the dong depreciation at no more than 2 per cent is feasible with the current foreign currency reserves and the high surplus in the general balance.

The $8 billion target for the general balance surplus will be within reach next year. The feasibility of this lies in the fact that the surplus is estimated to reach more than $10 billion by the end of November this year.

The currency's foreign currency collection source is expected to experience the negative impact of the export revenue of crude oil, which has fallen by 30 per cent to a four-year low of roughly $60 per barrel. However, the central bank remains optimistic about other foreign currency sources. Moreover, they asserted that the decrease in the income from oil exports would be offset by the revenue gained from the export of other products.

According to the Ministry of Industry and Trade, Viet Nam's exports will be accelerated next year with the assistance of a series of trade agreements to be signed with foreign trade partners.

After recording a trade turnover of $150 billion for the first time in 2014, three times the figure when the country joined the World Trade Organisation, Viet Nam has targeted to increase export revenue next year by 10 per cent and trade deficit to account for 5 per cent of the total export value.

Viet Nam has settled a Free Trade Agreement with the Republic of Korea. Meanwhile, the country will sign an agreement with the Customs Union of Russia, Belarus and Kazakhstan early next year. It is also expected to sign a Trans-Pacific Partnership (TPP) with 11 countries, as well as an FTA with the European Union soon.

Viet Nam also places high hope on the Russian market, which has high demands for many different products due to the sanctions imposed by other western countries.

Industry insiders also forecast that a rise in foreign direct investment and foreign portfolio investment next year would lead to an abundant foreign currency supply. This would help balance supply and demand, as well as aid the central bank in its foreign exchange stabilisation policy. — VNS

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