Vietnam Currency Discussion Board

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Vietnam money: dong rates rise on strong loan demand


Overnight lending rates in the Vietnamese dong firmed in the past week due to stronger demand for loans, especially from the corporate sector, bankers said Monday.
Three of Vietnam's four main banks offered overnight loans in dong at 7 percent on Monday, compared with a range of 3.7-5.0 percent last week. Dong overnight loans were being fixed at 6.51 percent, market data showed.

As of mid-September, outstanding loans in Hanoi totaled VND150 trillion, up 26 percent compared with the beginning of the year, the central bank's Hanoi branch said last week.

Lending in dollars, which accounted for 33 percent of the total loans, grew 23.3 percent, while deposits in both dong and dollars grew only 17.5 percent in in the period, indicating higher demand for imports, the bank said.

"Demand for dong loans usually soars in the fourth quarter as companies need funds to meet contract payments," a banker at a private bank in Hanoi said.

Deputy Prime Minister Nguyen Sinh Hung said last week Vietnam needed 554 trillion dong next year, or nearly 20 percent more than this year, to invest in major infrastructure projects, such as sea ports, roads and industrial parks.

The government aims to raise VND201 trillion ($12.4 billion) in 2008 from the private sectors and borrow VND40 trillion from state-run banks for its projects.

On the dollar front, several banks including Sacombank, VIB Bank, Eximbank and ABBank have raised interest rates on dollar deposits to raise more funds to meet higher expected demand from importers.

Most banks now offer 5.5 percent to 5.7 percent annual yield to 12-month dollar deposits, from 5.2 to 5.5 percent previously.

The Asian Development Bank said it had revised down Vietnam's current account balance in 2007, saying it would face a deficit equivalent to 5 percent of gross domestic product, from a small surplus of 0.2 percent previously forecast for this year.

Slowing exports – due to less sales of crude oil and seafood – coupled with rising imports have widened the trade gap, leading to the current account deficit, ADB said on Monday.

But it said overseas remittances – a key input of Vietnam's foreign exchange reserves – and tourist arrivals remained strong.

Using the State Bank of Vietnam and sources to calculate remittances, ADB said actual remittances for the first half of 2007 surged 53.4 percent from a year earlier to $2.9 billion. Remittances stood at $1.89 billion in the first half of 2006.

ADB said its own forecast of remittances for the whole of 2007 is $5 billion.

Source: Reuters

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