Director General of the Monetary Policy Department under the State Bank of Vietnam (SBV) Phạm Thanh Hà

Commercial banks have slashed interest rates in a coordinated effort to support businesses and customers affected by the novel coronavirus (COVID-19) outbreak. Director General of the Monetary Policy Department under the State Bank of Vietnam (SBV) Phạm Thanh Hà discusses the details of the plan.

What has the banking sector done to support businesses, households and help cope with the devastating effects of the outbreak on the economy?

From the onset of the virus outbreak, the Government has ordered ministries and agencies to prepare solutions and responses to mitigate the adverse effects on the economy. The SBV has worked together with commercial banks and credit institutes to find ways to shoulder the hardship with businesses.

The SBV has been staying on top of the latest developments of the outbreak as well as the financial market. For example, SBV Directive 01/2020/TT-NHNN issued on March 13 provides guidance for commercial banks to extend their credit lines, reduce interest rates and restructure debt for firms affected by the outbreak.

This is in line with what has been done by many central banks after the US Federal Reserve cut interest rates to 0-0.25 percentage points per year for just two weeks, a highly irregular move. The SBV’s decision was made after careful consideration of international market trends and plummeting oil prices as well as our confidence in Việt Nam’s macroeconomic performance, which had been strong in recent years. The interest cut is the SBV’s signal to businesses that we have their backs in this difficult time.

Will the interest rate cut have any effect on the economy’s stability and the Government’s effort to curb inflation?

The SBV is committed to our policy to slash interest rates at the moment. We have taken into consideration the Government’s objective to control inflation and the safety of the financial system. Besides, the interest rate cuts only apply to short-term loans (under six months). This is supposed to give businesses some breathing room to review and revamp their capital structure and come up with long-term measures.

For the time being, slashing interest rates by 0.5 percentage points will help bring down financing costs for businesses, which many desperately need.

What are the SBV’s mission objectives for the near future?

The SBV will continue to closely monitor Việt Nam’s macroeconomic developments as well as the global economy. We must stay up-to-date with the latest reports and statistics in order to make accurate forecasts and utilise all financial measures and policies available in our arsenal.

The SBV has great confidence in our capacity and resources to maintain Việt Nam’s macroeconomic stability, to keep inflation under control, to intervene when necessary in the forex market and to ensure a healthy flow in the currency market.  VNS