Banking authorities are working hard to make sure the foreign currency market runs smoothly.
For example, Binh Son Refining and Petrochemical Company Limited (BSR) deputy chairman Pham Dang Nam is one business chief happy with the market’s performance.
“Our company heavily depends on the [dong-US dollar] exchange rate situation, so that when the governor affirmed of exchange rate stability in 2013 we are happy,” he said.
BSR is responsible for the management of Quang Ngai province’s Dung Quat oil refinery, Vietnam’s first.
The refinery’s annual revenue exceeds VND100 trillion, with around 90 per cent of expenditure in US dollars. Each month, the plant needs $210 million to cover diverse expenses.
In 2010, BSR incurred losses associated with exchange rate amounting to VND778 billion ($37.4 million) in 2010, roaring to VND4.1 trillion ($197 million) in 2011 when the VND lost 9.3 per cent against the US dollar. Last year, such loss fell to VND75 billion ($3.6 million) thanks to a stable exchange rate.
Nam proposed the State Bank greenlight the transfer of foreign currency from BSR’s management authority PetroVietnam to help it with crude oil imports and long-term loan interest payments.
At present, the State Bank has only given the nod for BSR to source PetroVietnam dollars to support short-term loan interest payments for purchasing crude oil in the domestic market.
Under Circular 37/2012/TT-NHNN, to lend BSR credit institutions must get SBV approval after appraising the company loan proposals. This may affect crude oil supplies serving Dung Quat production and put the plant at risk of incurring a temporary cessation of production.
Meanwhile, Dung Quat Woodchip director Nguyen Ni wants US dollar interest rates to drop.
Ni said local firms faced 4-5 per cent, per year rates for US dollar loans, while foreign-invested firms could access softer 1-2 per cent rates.
“As a business director and head of Quang Ngai Export Woodchip Processing Association, we want more favourable interest rates to support business development,” said Ni. State Bank governor Nguyen Van Binh replied that stable exchange rate would benefit all firms.
Binh listed anti-dollarisation moves and restrictions on dollar lending as achievements. Binh said current 2 per cent, per year ceiling mobilising rate provided a base for credit institutions to lend the greenbacks at around 5 per cent, per year interest rate which is cheaper than sourcing loans from foreign entities at around 7-8 per cent, per year.
He also pledged to help BSC address hardships associated with dollar sourcing difficulties.
Regarding the exchange rate situation in 2013, senior expert Le Xuan Nghia assumed the exchange rate would not incur big pressures this year since the country’s foreign reserves have now exceeded $30 billion, tantamount to over 14 import weeks, as last year the State Bank bought in around $20 billion, contributing to ensuring national financial security.
This year, the trade balance was forecast to incur low deficit whereas the demand for import would remain low on the back of sharply declining demand in the domestic market.
Nghia suggested revision level of around 2-3 per cent to the exchange rate this year and the State Bank might take the revision from 2013’s third quarter.