State Bank warns of devaluation

State Bank warns of devaluation

The Vietnamese dong could be devalued by as much as 2 per cent against the US dollar this year, said Governor of the State Bank of Viet Nam Nguyen Van Binh.

Binh made the comment earlier this week at a meeting with leaders of enterprises in the southern province of An Giang, where exporters asked the central bank to devalue the dong in a move to help boost export revenues.

General director of the Nam Viet Seafood Co Doan Toi said that since Viet Nam was an agricultural economy foreign exchange rate policies should benefit agricultural exports to boost the sector's growth.

A 3-5 per cent devaluation of the dong against the dollar would support the country's exports of agricultural, forestry and fisheries products, Toi said.

General director of the Thuan An Seafood Processing Co Nguyen Thi Hue Trinh said that while the costs of materials for the tra fish industry had increased by 20 per cent during the past year, the stable forex rate in an export-oriented market was bound to hurt exporters.

However, Governor Binh said that devaluing the dong would not be beneficial to the overall economy as Viet Nam may still have a trade deficit during the next five years.

A stable exchange rate provided positive signals to the economy and the dong should only depreciate by 1-2 per cent, Binh emphasised.

He said that although the country aimed at limiting foreign currency lending to fight dollarisation, local firms with foreign currency revenues from exports were still allowed to borrow in foreign currency to reduce costs.

Commercial banks would cut dollar lending rates to 4-5 per cent to support exporters in the coming time, Binh added.

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