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Loosening foreign exchange controls (15/01)
06/08/2010 - 244 Lượt xem
Decision No 2554/QD-NHNN doubled the exchange rate margin for the US
dollar to 0.5 per cent, and Decree No 160/2006/ND-CP specified implementation
of the Ordinance on Foreign Exchange.
Truong Van Phuoc, director of the State Bank’s Department of Foreign Exchange Management, commented on these issues to Viet Nam News.
Why did the State Bank decide to relax the exchange rate margin between the US dollar and Vietnamese dong to 0.5 per cent from 0.25 per cent?
I agree that the margin of 0.25 per cent did not present any inherent problems. The loosening of controls on the exchange rate is part of a series of financial and monetary measures which the State Bank has carried out for the past three years to create a more flexible exchange rate regime.
Therefore, the expansion of the exchange rate margin is not as important as it would have been several years ago. It would be wrong to use only the foreign exchange margin to evaluate the foreign exchange policy.
The State Bank has chosen a more flexible exchange rate margin to serve the nation’s integration process. A wider exchange rate margin will build trust in foreign investors as they see that the nation’s economy is not accumulating risks as was seen in other countries in the region in the financial crisis in 1997. With the adjustment of the foreign exchange rate,Viet Nam
How will the new exchange rate margin affect foreign investors? Will it have a negative impact?
We should not emphasise negative effects.
The State Bank is carrying out a managed float in our foreign exchange rate regime. The expansion is in line with other measures to float the forex regime while making foreign investors feel more secure about investing inViet Nam
Will Decree No 160/2006/ND-CP implementing the Ordinance on Foreign Exchange cause any difficulty to foreign investors?
This is not the first time that foreign investors have been required to convert foreign currency investments into dong. Moreover, the decree also provides for internal capital allocation and authorised import agents with which foreign investors can use US dollars instead of Vietnamese dong. The Government is committed to giving investors no difficulties in converting profits from dong into foreign currencies to transfer out of the country as well as in drawing on their capital.
Do you have any comment on the abundant suppy of US dollars in commercial banks as has been reported in several domestic newspapers?
It cannot be said that banks have an oversupply of US dollars because the country absorbed many sources of dollars last year. Last year, the country welcomed a strongly increased flow of foreign investment and foreign exchange remittance. Exports also rose. Therefore, that the greenback supply would be plentiful is an evident truth.
An abundance or shortage must be evaluated at a specific exchange rate because investors in the market behave upon their expectations. If commercial banks do not make profit on that specific exchange rate they will not sell dollars. Besides, it is not right to make a conclusion that the economy has an excess of dollars when national trade is still in deficit. The situation of banks reporting that they have many dollars in their accounts is very short-term
Truong Van Phuoc, director of the State Bank’s Department of Foreign Exchange Management, commented on these issues to Viet Nam News.
Why did the State Bank decide to relax the exchange rate margin between the US dollar and Vietnamese dong to 0.5 per cent from 0.25 per cent?
I agree that the margin of 0.25 per cent did not present any inherent problems. The loosening of controls on the exchange rate is part of a series of financial and monetary measures which the State Bank has carried out for the past three years to create a more flexible exchange rate regime.
Therefore, the expansion of the exchange rate margin is not as important as it would have been several years ago. It would be wrong to use only the foreign exchange margin to evaluate the foreign exchange policy.
The State Bank has chosen a more flexible exchange rate margin to serve the nation’s integration process. A wider exchange rate margin will build trust in foreign investors as they see that the nation’s economy is not accumulating risks as was seen in other countries in the region in the financial crisis in 1997. With the adjustment of the foreign exchange rate,
How will the new exchange rate margin affect foreign investors? Will it have a negative impact?
We should not emphasise negative effects.
The State Bank is carrying out a managed float in our foreign exchange rate regime. The expansion is in line with other measures to float the forex regime while making foreign investors feel more secure about investing in
Will Decree No 160/2006/ND-CP implementing the Ordinance on Foreign Exchange cause any difficulty to foreign investors?
This is not the first time that foreign investors have been required to convert foreign currency investments into dong. Moreover, the decree also provides for internal capital allocation and authorised import agents with which foreign investors can use US dollars instead of Vietnamese dong. The Government is committed to giving investors no difficulties in converting profits from dong into foreign currencies to transfer out of the country as well as in drawing on their capital.
Do you have any comment on the abundant suppy of US dollars in commercial banks as has been reported in several domestic newspapers?
It cannot be said that banks have an oversupply of US dollars because the country absorbed many sources of dollars last year. Last year, the country welcomed a strongly increased flow of foreign investment and foreign exchange remittance. Exports also rose. Therefore, that the greenback supply would be plentiful is an evident truth.
An abundance or shortage must be evaluated at a specific exchange rate because investors in the market behave upon their expectations. If commercial banks do not make profit on that specific exchange rate they will not sell dollars. Besides, it is not right to make a conclusion that the economy has an excess of dollars when national trade is still in deficit. The situation of banks reporting that they have many dollars in their accounts is very short-term
