State Bank of Vietnam Governor Nguyen Van Giau spoke to Thoi bao Kinh te Viet Nam (Vietnam Economic Times) about measures to achieve higher credit and economic growth.

State Bank of Viet Nam Governor Nguyen Van Giau speaks to the press. Photo by VNN.

The Government and ministries have been relatively successful in controlling inflation. Is there a basis for the State Bank of Vietnam to ease monetary policy to support stronger economic growth?

The State Bank has been very flexible since the beginning of the year in managing monetary policy to harmonise the twin targets of curbing inflation and sustaining high economic growth.

The bank has regulated the market by pumping in a large amount of money and pulling in as soon as demand for capital spiked, but deposits in commercial banks plunged in the first three months of this year.

We also poured VND10 trillion (US$526 million) into VietinBank to help it provide loans to exporters at preferential interest rates. The same amount was also supplied to Agribank which has already lent up to VND12 trillion ($6.6 billion) to stimulate investment in agriculture and rural areas.

In so saying, I want to emphasise that the State Bank has kept a close eye on the consumer price index to properly manage monetary policy.

Credit growth remained slow in the first and second quarters of this year. How would you comment?

Between January and July 31, total payments have increased by 12.96 per cent, while bank deposits have risen by 6.3 per cent and outstanding debt by 12.97 per cent. These figures are not so far off targets that the State Bank has set for total payments to increase by 20 per cent and credit growth to reach 25 per cent.

It is also inaccurate to compare this year\'s figures with last year\'s because 2009 was a year in which banks were lending more as part of the economic stimulus package.

How significant are the recent fluctuations in the dong/dollar exchange rate?

Economic indices remain healthy. While imports are still exceeding exports, the trade deficit is being monitored very closely. Factors generating the trade balance are also satisfactory. For instance, even though newly-registered foreign direct investment (FDI) has not increased, FDI disbursements have reached US$6.4 billion, an increase of 1.6 per cent over the same period last year.

There was also an increase in the amount of remittances from abroad, which totalled $3.9 billion in the first six months of this year. Indirect foreign investment is also in surplus of $300 million. All these will contribute to stabilising foreign exchange rates.

Why are enterprises still complaining that it is still difficult to access preferential 12-13 per cent interest rates?

The preferential loans are available only to exporters, agricultural enterprises and small – amd medium-sized enterprises. The Bank for Investment and Development of Viet Nam (BIDV), Vietcombank, Vietinbank and Agribank are all lending to rural borrowers at a yearly rate of 12-12.5 per cent. Higher rates must be charged on consumer loans or for business activities with higher risks.

The State Bank will continue to support the banking system to supply capital for the economy. Banks that make over 70 per cent of their loans to agriculture and rural areas will be allowed to slash their compulsory reserves from 3 per cent to a mere 0.1 per cent. The State Bank will supply Agribank in particular with medium- and long-term capital totalling VND4 trillion ($2.2 billion).

An estimated VND30 trillion ($1.57 billion) will be injected into banks which lend for agriculture and rural areas.

What\'s the State Bank\'s orientation for the rest of the year?

Measures will focus on achieving credit growth of 25 per cent and contributing to an economic growth rate of 6.5 per cent or more.

For the first time in a long time, the banking system has returned to a state in which the rate of attracting capital exceeds the growth rate in lending. Bank deposits may decline by the end of this year, but it\'s not worth worrying about since depositing money with banks will continue to remain an attractive investment channel.