Central bank says interest rates to remain high for now, seeks businesses’ ‘understanding’

By Dat Nguyen   May 11, 2023 | 07:38 pm PT
Central bank says interest rates to remain high for now, seeks businesses’ ‘understanding’
A cash transaction is seen at a bank in Hanoi. Photo by VnExpress/Giang Huy
State Bank of Vietnam governor Nguyen Thi Hong said bank lending rates would be reduced at the appropriate time but remain high for now to achieve macro targets.

"We really want to bring down the interest rates," she assured southern business leaders at a meeting in Ho Chi Minh City Thursday.

But interest rates are only part of the bigger picture and the central bank needs to take into account other factors, she said, asking for their understanding.

"We [also] need to ... keep currency exchange rates stable and ensure the safety of the banking system. All these goals are important."

Hong was responding to complaints from some executives who said they have been facing great difficulties due to the high loan interest rates.

Ly Kim Chi, chairwoman of the Food and Foodstuff Association of HCMC, said businesses in the food sector pay 7-8% interest on their loans but most others still pay 10%.

These rates are too high to foster their recovery, she warned.

"Bringing down the rates are vital to the improvement of businesses’ health."

The central bank should instruct lenders to reduce the rates, she said.

"Banks have been repeatedly reporting big profits while other businesses are struggling."

Phan Van Mai, the HCMC chairman, said many businesses have called for reducing the rates from 10% to 7-8% for all sectors.

But the SBV has one eye on inflation.

Hong said there have been suggestions to cut interest rates since inflation has declined.

But core inflation remains at nearly 5% while the target for the year is 4.5%, and the central bank needs to consider the future before making any monetary policy, she said.

"We will continue to keep watch. If the U.S. Federal Reserve slows down its rate hike and liquidity improves we will bring down policy rates."

Repayment of long-term debts has declined since businesses’ cash flows have dwindled, she said.

Controlling risks is vital, especially after two banks in the U.S. with assets of over $200 billion collapsed recently, she said.

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