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Reform key to Vietnam's economic
growth
HANOI - Vietnam's
7.12% economic growth over the past five years has
been largely attributed to drastic reforms in
monetary policy.
The State Bank of Vietnam
(SBV) managed to overcome the impact of the
regional financial crisis by the end of 1999,
reducing inflation from 9.2% to 0.1% in just one
year from 1998 to 1999.
By 2001,
joint-stock commercial banks and creditors had
been restructured into a well-organized system,
giving them new financial strength.
Indirect monetary tools have been popular
in the banking system since 1990, along with the
introduction of a comprehensive and transparent
monetary legal framework.
By shifting to
the daily figures for the rates of foreign
exchange in 2000 from a long-term fixing, the SBV
has contributed to positive changes in the
monetary market, said bank deputy governor Phung
Khac Ke.
The exchange rates between
foreign currencies and the Vietnamese dong have
been kept stable in spite of the instability of
many foreign currencies.
The flexible
management of the exchange rates and appropriate
measures in foreign exchange control have helped
ease the tension in foreign currency
supply-demand, developed the inter-bank market,
and increased the central bank's foreign currency
reserves.
The liberalization of interest
rates has been accelerated with the full
liberalization of interest rates in the commercial
credit market having been applied since mid-2000.
The State Bank of Vietnam has gradually
adjusted the re-financing interest rate, making it
the ceiling interest rate of the inter-bank
market, while discount interest rates have been
turned into the lowest interest rates.
General director of the Vietnam Industrial
and Commercial Bank, Pham Huy Hung, said the
increased efficiency of monetary-policy management
has made a positive impact on the interest rates
of deposits and loans of credit organizations, and
helped the SBV regulate interest rates in the
market principle.
Hung noted that the
enforcement of the Banking Law since June 2004 and
new regulations allowing banks to use government
bonds in transactions have helped increase the
volume of transactions between the SBV and other
banks, thus strengthening the regulative capacity
of the central bank toward the monetary market.
Between 1999 and 2003, the State Bank of
Vietnam successfully executed a demand-boosting
monetary policy, which contributed greatly to
countering deflation and boosting exports and
economic development. Between mid-2004 and now,
the bank has implemented a cautious, controllable
monetary policy.
Aiming to stabilize the
value of the Vietnamese dong, control inflation
and create a favorable macro-economic environment
for sustainable growth, the SBV has continued with
the reform of its monetary policy, considering it
as a key task for the coming years.
In
this end, Dr Le Xuan Nghia from the SBV's Banking
Development Strategy Department, suggested that
the implementation of the monetary policy should
continue to be based on the regulation of
reserves. At the same time, preparations should be
accelerated to regulate the market through
interest and exchange rates in line with the trend
of financial liberalization, he said.
On
the management of foreign currencies, Nghia
proposed to raise the convertibility of the
Vietnamese dong, reduce the use of foreign
currencies in Vietnam and thereby reduce the
"dollarization" phenomena.
He also said
the exchange-rate band should be widened and the
exchange rate should be based upon a number of
foreign currencies instead of one strong currency
like the US dollar as at present.
(Asia
Pulse/VNA) |
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