The word "belief" has cropped up often during the recent months when one talks about the monetary market and the management policies by the State Bank of Viet Nam (SBV).
The central bank has adopted a series of measures, as well as made explicit moves to stabilise the market, but a number of people still worry if the policies have been able to lay the foundation for market stability in the future. Vietnam News Agency spoke to the Deputy Governor of SBV, Nguyen Thi Hong, about this issue.
|Deputy Governor of SBV Nguyen Thi Hong,
Can you tell us about SBV's role in monetary management policies in 2014?
Last year reflected the most obvious results of monetary policy management and banking operations. SBV's management made an important contribution to maintaining inflation at a low level, stabilizing the macro-economy and supporting economic growth, which helped improve the national credibility index.
The monetary policy management also played a role in stabilising the monetary and foreign exchange market, with the space of interest continuously being reduced by 1.5 to 2 per cent per year, in comparison with the end of last year. It also enriched the national forex reserves.
In addition, the monetary policy management has also helped credit institutions become more effective in operations and ready to meet the demand for payment in the economy.
What lessons of success has SBV learnt from its management of forex policies?
During the process of monetary policy management in general and forex policy management in particular, SBV has learnt a number of important lessons.
The first one is to effectively manage the forex policy, and that the target of a monetary policy should be getting close to the goal of containing inflation and stabilizing the macro-economy. In doing so, it has helped improve the position of the Vietnamese dong and stabilize forex as well.
The second one is that the management of monetary policies should be implemented in a synchronized fashion, especially policies on interest rate and forex rates. This will help raise the position of the Vietnamese dong and encourage people not keep foreign currencies.
The third one is that forex is impacted by many factors, especially the sentiments of psychology and hope. Therefore, forex policy management needs to be co-ordinated with SBV's other measures, including communication.
During the recent time, SBV has taken the initiative to inform on issues related to monetary policy management–lifting people's market psychology and helping stabilize the forex market.
In 2014, a distinguished example of this was the handling of China's illegal placement of its Haiyang Shiyou-981 drilling rig in Viet Nam's exclusive economic zone and continental shelf, which hurt Vietnamese businessmen's psyche. In that case, SBV regularly updated the public about the domestic monetary market's stability, preventing false reports from encouraging speculative and profit-seeking activities in the market.
In terms of bad debts, many people have highly valued SBV's open and drastic measures to resolve bad debts during the recent past. How will be these bad debts be resolved in the future?
SBV sees resolving bad debts as one of the key tasks in managing the entire banking system. We plan to drastically implement measures aimed at lowering the bad debt rate to below 3 per cent by the end of this year. To reach that target, SBV will continue to guide credit institutions to strengthen a risk provision fund, reduce bad debts from arising, reinforce debt collection, as well as minimize spending–and concentrate its finances on resolving bad debts.
The SBV also resumed operations of the Viet Nam Asset Management Company (VAMC) last year. The central bank has so far submitted to the Government, a draft document revising the Decree No53/2013/ND-CP, which regulates the establishment and organisation of VAMC. After it is approved, the central bank will issue circulars guiding businesses and also remove any obstruction in the path of VAMC's bad debt resolving process.
The central bank will also study and propose a method to purchase the debts at market prices in order to push up the bad debt resolving process in the banking system this year.
SBV has been recognised for stabilising forex rates in the past. How will it do the same in 2015? Was the adjustment of forex rates earlier this year part of SBV's plan?
The increase in the VND/US$ exchange rate by 1 per cent earlier this year was part of SBV's management plan for 2015. It was carried out right after the Government issued Resolution 01/NQ-CP in 2015 on socio-economic development. Following the adjustment, the forex rate and market have become stable.
The SBV will continuously monitor changes in the macro-economy and the international and domestic monetary market, as well as implement suitable policies and measures.
There are still different views on the country's economic situation in 2015. What will be SBV's management role in 2015?
First of all, SBV will determine how to control inflation and stabilise the macro-economy in order to support economic growth and ensure safety of the operations of credit institutions.
The central bank will also direct its system to implement measures resolving difficulties in trade and production, especially measures related to credit and interest rates. The credit programmes will be implemented under Government supervision in order to steer investment flows into production and trade, especially the five prioritised areas set out by the Government: agriculture-rural, export and small and medium-enterprises, as well as the support industry and businesses that use high-technology.
Finally, the banking system will also efficiently implement measures to restructure, as well as resolve bad debts as per plan, in order to set up a system of credit institutions that operates safely and is ready to meet demand for payment in the economy if needed. — VNS