LookAtVietnam – International organizations have released reports lauding the decision by SBV to adjust the dong/dollar rate and basic interest rate.
“I think the decisions that they have announced … signal that they have decided to tackle the emerging macroeconomic risks that they were facing, and I think that’s positive,” observed Benedict Bingham, the IMF’s senior resident representative, as quoted by Reuters.
Meanwhile, US Goldman Sachs also believes that the intervention was necessary. The November 25 report by Goldman Sachs, released the same day made its decision, offered three major conclusions.
First, Goldman Sachs averred that raising the basic interest rate is important to help control risks caused by rapid development and inflation, the two emerging problems of
The fact that SBV raised the basic interest rate is evidence that Vietnamese policy makers are now wary and are determined to take the necessary steps to prevent risks.
In addition, the basic interest rate will improve the attractiveness of the local currency, which will in turn stabilize the dong/dollar exchange rate.
Second, the adjustment of the dong/dollar rate has been attributed by Goldman Sachs to the payment balance deficit and foreign currency reserves problems in
Third, regarding the narrowed exchange rate trading band, the Goldman Sachs’ report argued that this is an effort by SBV to slow the decrease in the value of dong against the dollar.
Goldman Sachs also asserted that once the Government asks state-owned corporations to sell foreign currencies that they earn from exports to SBV, they will succeed in assisting the central bank efforts to protect the local currency from devaluation.
Dau Tu Chung Khoan newspaper, citing Standard Chartered Bank’s updated report on
According to Standard Chartered Bank,
Explaining the decline in foreign currency reserves, the bank cited the decrease in overseas remittances and direct foreign investment. Overseas remittances are forecast to drop by 20 percent to 5.8 billion dollars in 2009. A 2010 reversal would help ease the pressure on the international payment balance.
The Government is seeking US dollar loans from the World Bank, other Asian economies and the Asian Development Bank.
VietNamNet/DTCK, DT, TBKTVN