HANOI — Experts are advocating for the State Bank of Vietnam (SBV) to maintain the current zero per cent interest rate on US dollar-denominated deposits, citing stability in the foreign exchange market.
During a recent SBV meeting addressing the policy, Deputy Governor Phạm Thanh Hà emphasized the need for a comprehensive assessment of its implementation. Hà noted that the SBV had initially capped dollar-denominated deposit rates at 1 per cent annually for organizations in 2010 and 3 per cent for individuals in 2011, progressively reducing them to zero per cent by the end of 2015.
According to Hà, this policy is part of the SBV’s comprehensive approach to stabilize the foreign exchange market, manage exchange rate expectations, and bolster the Vietnamese đồng’s value. He reported that thanks to this policy, both the foreign exchange rate and market have remained stable. Additionally, dollarization in the economy has significantly decreased, with foreign currency deposits as a percentage of total means of payment dropping from 11.06 per cent in 2014 to approximately 6.05 per cent by June 2024.
Experts at the meeting praised the policy, attributing its success to stabilizing exchange rates, reducing dollarization, increasing foreign exchange reserves, and boosting remittances, foreign indirect investment, and foreign direct investment flows.
Lê Xuân Nghĩa, an expert at the meeting, highlighted the SBV’s methodical approach in gradually lowering dollar-denominated deposit rates to zero per cent, recommending that the SBV continue to uphold and evaluate this policy comprehensively.
Furthermore, economist Nguyễn Xuân Thành supported maintaining the current policy, presenting three reasons. Firstly, he argued that any sudden change could negatively impact market sentiment in the short term. Secondly, he pointed out that despite the US Federal Reserve’s current high interest rates above 5 per cent, their medium-term strategy aims to stabilize rates around 2 per cent, suggesting stability in interbank dollar interest rates and enabling Vietnam to sustain zero per cent interest rates in the medium term. Finally, Thành underscored that the policy aligns with Vietnam’s strategic shift from dollar mobilization to dollar transactions, thereby reinforcing the đồng’s value over the long term.
Echoing these sentiments, expert Trần Thọ Đạt emphasized the stability of the current foreign exchange market, suggesting that policy adjustments are unnecessary unless significant market fluctuations occur.
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