In a decision it released April 10, the State Bank of Vietnam ordered banks to offer foreign currency loans only to importers and those making repayments of foreign loans or investments in foreign countries.

Exporters are not pleased with the central bank’s move.

Tran Thien Hai, chairman of the Vietnam Association of Seafood Exporters and Producers (VASEP), said: “We [exporters] fetch a large amount of dollars for the country every year. Why are we now not allowed to borrow dollars?”

VASEP said at a meeting last week it had written a petition against the decision to the prime minister and the Ministry of Agriculture and Rural Development, adding that allowing exporters to borrow dollars was inevitable.

Nguyen Dinh Huan, deputy general director of An Giang Fisheries Import Export Joint Stock Company, or Agifish, one of the country’s largest seafood exporters, said he had no idea why exporters, who would be able to repay dollar loans more easily than others, weren’t permitted to borrow dollars.

“We regularly earn dollars by exporting our products, but now we can’t borrow,” he said, adding skeptically, “Is it possible that only companies which can’t earn foreign currency can borrow foreign currency loans?”

Seafood exports were worth more than US$3.7 billion last year and around $1.1 billion in the year to date.

Local firms reacted nervously to the state bank’s decision since many can’t afford the dong-lending interest rates, which are extremely high.

“Dollar lending interest rates are fairly high at 8.1-8.7 percent per year,” a company executive said.

“But they remain much lower than dong interest rates, which are 16.2-18 percent per year.”

Exporters said they had to pay high fees to convert their dollar earnings into dong because they had to repay their bank debts in dong.

Seafood exporters, who were already struggling because of the strong dong, cannot afford the high interest rates on dong loans.

Analysts said the central bank’s move was aimed at cooling off the high demand for the greenback from local companies and earmarking dollar loans for gasoline, steel and machinery import firms.

But they warned the desired effect would not be achieved because of the rising trade deficit and widening gap between the dong and dollar interest rates.

Source: TBKTSG