Vietnam Putting an End to Dollarization

According to schedule, to 2015 - 2016, deposits and loans in foreign currency will be fully terminated in the Vietnam market.

According to the roadmap against the gold and dollarization of the Vietnamese Government, gold influence will be demolished by 2012 and dollarization by 2015. ‘Goldization’ should have ended on November 25 last year, but unfortunately because some banks have difficulties in gold liquidity, the State Bank of Vietnam (SBV) delayed until June 30, 2013.

In 2015 or 2016, the market will witness a reduction, and eventually an end to foreign currency loans. By receiving deposits in gold or foreign currency, it means that Vietnam is dominated by the United States’ monetary policy. Of course, people are still allowed to buy and sell gold and foreign currencies freely. Vietnamese Government only banned the use of gold and foreign currencies to pay for local services and the prohibition of using gold and foreign currency as deposits.

With import and export enterprises, according to Dr Le Xuan Nghia, member of the National Advisory Council for Monetary and Fiscal Policies, temporarily, enterprises can still maintain payment in foreign exchange. However, in the near future, this payment account will also be removed, so that inflow foreign currencies will be exchanged immediately. Anti-dollarization activities will have some compromises under pressure, however communication teams are expected to support this policy to remove concerns among people and enterprises.

In order to curb foreign currency speculation in the population, Dr Nghia said that there should be a way for banks and people to trade foreign currencies freely. For example, when possessing capital surplus, banks will buy gold and sell it when its price goes up. In this way, gold will be exchanged into money very quickly by buying-selling, rather than using deposit accounts.

Also according to Dr Nghia, using deposit accounts (savings mobilization in gold) is very dangerous, because when gold is in the assets of commercial banks, if its price go high, banks’ assets will decrease quickly, causing bad loans by thousands of billion VND, as recently. European banks do not mobilize gold. If people are afraid of having their gold stolen, their gold will be saved in banks with charges. Of course, to promote people to sell gold, or exchange gold into money, the first thing to do is to reduce the inflation rate, stabalize macro-economic conditions, improve VND value and create trust among people. Or else, if the inflation rate is high and an economic crisis occurs, people will take a refuge in gold.

Source VCCI

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