Using gold for the better of the country

Some economic experts assumed the State Bank should not mobilise gold from the community before knowing how to make the move more effectively.

Some others argued it would be a great waste when such tremendous capital sources sits idle in the community.

“A cautious approach is essential when drawing plan to raise gold from the community. It should not be delayed due to its complexity as several hundred tonnes of gold now sit waste in the community whereas it could consolidate national reserves and effectively service economic development,” said Vietnam Gold Business Association general secretary Dinh Nho Bang.

Senior expert Pham Do Chi suggested depositing mobilised gold at international organisation to take loans as in fact Vietnam is taking foreign loans for development needs not at low costs.

Similarly, Dr. Tran Du Lich recommended commercial banks use raised gold to discount with the State Bank in exchange for dong-denominated loans as in dong so they still have gold for repayment upon request.

Economic expert Huynh Trung Khanh suggested the State Bank allow listed jewel firms with transparent financial statements to borrow gold with clear lending conditions. Lending limits must also be regulated to ensure payment capacity of these companies.

Bang suggested devising measures to avert people from pumping money into physical gold to minimise hoarding.

State Bank governor Nguyen Van Binh said the State Bank had worked out plan on de-goldisation consisted of building legal framework, stopping mobilising and lending in gold at credit institutions and instead shifting from mobilising-lending gold into buying-selling gold.

At this time the State Bank is reportedly going along with the first two steps and about to take third step.

State Bank deputy governor Le Minh Hung said in the coming period gold would be treated as with a foreign currency. Accordingly, credit entities will be barred from mobilising gold whereas people, wanted to put their gold in safe place, must pay fees for banks to keep their gold.

In reality, making people change their long-lasting habit of hoarding gold is by no means easy as gold hoarding often escalates when economic uncertainties mount up.

Hence, some experts suggested the State Bank hold on mobilising gold at least in the near term.

“The State Bank may allow banks to raise gold but should entirely forbid them from lending in gold or convert gold into dong to lend,” said Lich.