State firms told to sell dollars

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The circular regulates that eligible enterprises should sell their dollars from fixed-term and non-term deposit accounts, and other sources of foreign income from July 1. They will then be able to buy dollars from commercial banks to feed legitimate needs.

Foreign reserves have slid from a level of nearly $24 billion at the end of 2008 to only about $12 billion, some foreign financial institutions have estimated.

The order comes at a time when the commercial banking system has plenty of dollars in hand and has been lowering deposit interest rates.

By the end of March, 78 economic groups, corporations and enterprises held over $1.6 billion deposit, including $376 million in fixed-term deposits, according to the State Bank of Vietnam governor Nguyen Van Giau.

The SBV had previously ordered major groups and corporations to sell dollars back to commercial banks to ease a shortage of dollar supply, a situation that increased tension on both official and black forex markets.

The long love affair the Vietnamese public has with the greenback has caused numerous economic and social problems and interfered with effective policy management in recent years.

The circular is seen as an aggressive move in a series of measures taken by the central bank in the past three months to try to reduce the accumulation of the dollar in the economy, to regain control of unstable foreign exchange markets and to ease the downward pressure on the value of the Vietnamese dong – forces which have resulted in several currency devaluations, higher inflation and a widening trade deficit.

The central bank also raised compulsory reserves in foreign currencies at credit institutions this month from 6 per cent to 7 per cent, in a move to cut dollars for credit businesses.

As reported by the SBV on May 31, in comparison with the slight rise in the previous week, the forex rate had stabilised again. Currently, commercial banks are listing the rate at around VND20,520-20,610 per dollar.