HANOI: The State Bank of Việt Nam (SBV) announced yesterday that it would allow credit institutions and foreign bank branches to continue issuing short-term foreign currency loans to some borrowers. The ruling allows loans to be issued until the end of 2017, instead of December 31, 2016.
Under Circular 31/2016/TT-NHNN dated November17, 2016, credit institutions and foreign bank branches are allowed to consider offering short-term foreign currency loans to meet short-term capital needs for production or business plans for the export of goods via Vietnamese border gates until December 31, 2017. The borrowers are required to have sufficient foreign currency revenue from exports to repay the loan. The new circular replaces Circular 07/2016/TT-NHNN issued early last year that stated such loans would have to be completed by December 31, 2016.
With the policy, exporters will continuously have an opportunity to borrow foreign currencies at low interest rates. Currently, lending interest rates for short-term US dollar loans are roughly 3 per cent, while the rate for short-term đồng loans is some 5-6 per cent.
According to the SBV, the extension seeks to support local exporters in the context that their business and production still face difficulties due to adverse weather and negative consequences caused by the environmental pollution in the coastal central provinces. The regulation is also among the Government’s incentive policies aimed to support and develop local enterprises until 2020, which was approved in Decree 35/NQ-CP issued in May 2016.
Industry insiders said that the extension is also expected to reduce domestic demands for US dollars, believing that the dollar sharply strengthened against the đồng during the past day. Today, the đồng/ dollar exchange rate listed at many commercial banks exceeded VNĐ22,600 per dollar. This was the highest rate since this year’s January launch of the new đồng/dollar forex rate methodology, using a central reference rate for the daily based on an eight-currency basket and macro-economic conditions.
The insiders explained that without the extension, exporters who borrowed dollars from credit institutions would have to repay the loans before December 31, 2016. According to the SBV’s statistics, outstanding loans in foreign currencies in the first nine months of this year rose 5.44 per cent, against early this year. Meanwhile, local demands for foreign currencies often rise significantly at year-end to meet increasing imports, the insiders said.
