State Bank of Vietnam Governor Nguyen Van Giau said he expected remittances, inflow of foreign direct investment and export revenues to increase late this year.

The foreign exchange funds would be sufficient to cover a US$20 billion trade deficit expected in 2008, Giau said on the government’s website.

“The State Bank will continue to manage the exchange rate with flexibility based on market situations and maintain relative rate stability to promote exports and limit imports,” Giau said.

The central bank was also revising its regulations on licensing joint-stock banks to make sure these entities “are financially strong and highly competitive” as the country continues to integrate in the global market, Giau said.

The Foreign Investment Agency had forecast disbursement for foreign direct investment projects this year to jump nearly 38 percent from 2007 to a record $11 billion.

New pledges would more than double to $50 billion compared with last year.

Remittances from Vietnamese working overseas have also been forecast to reach a record $8 billion this year.

The Southeast Asian country's trade account has been under massive pressure this year as raw material prices soared but the trade gap has been narrowing after the government capped imports, especially consumer products such as cars and mobile handsets.

Still, January-to-July's accumulated deficit was double the same period last year at $15 billion, government data showed.

Weak demand for dollar

On the unofficial markets, the dong strengthened to a two-month high yesterday at about VND16,450 per dollar, in line with the interbank market rates and up from VND19,000 in June as demand to hoard the currency has weakened, dealers said.

"Many investors are putting their money back into the stock markets, real estate to take advantage of low prices so the dollar is not a favorite investment now," a Hanoi dealer said.

Meanwhile, bankers said yesterday their banks had cut annual interest rates on dollar deposits to around 6 percent this week from 8.5 percent in June.

The central bank said in a market review yesterday it received little interest from commercial banks to buy dollars last week.

"Because of the government's policy to limit imports, foreign currency demand between now and the yearend will not be as strong compared to the same period last year," DongA Bank Chief Executive Tran Phuong Binh was quoted as saying.

Source: TN, Reuters