>>Key tasks for the second half of this year

According to Dr Vu Thanh Tu Anh in charge of the Fullbright Economic Teaching Programme, there were tighter controls on the supply of money and credit in the first half of this year as growth rates were maintained at 2.3 percent and 7.1 percent, respectively, much lower than the figures recorded in the same period last year.

If the circulation of money and credit is tightened in a capital-lacking economy like Vietnam, it will drive interest rates up, he said.

In fact, the SBV has undertaken “cautious” measures to curb inflation and stabilize the monetary market by increasing interest rates in different forms, keeping the inter-bank exchange rates at somewhere between 18,932 and 20,693 VND for USD, readjusting the tools of the monetary policy, and narrowing the trade band of exchange rates applied by credit organizations compared to the average inter-bank rates from 3 percent to 1 percent.

One virtue of the SBV’s monetary policy is that there were no big differences between the official and unofficial exchange rates over the past six months, Dr Anh said.

He attributed the stability of the VND/USD exchange rates to the SBV’s decision to stop credit organizations from mobilizing capital and lending in gold, and State economic groups and corporations from trading foreign currencies.

The decision has helped reduce domestic gold demand and keep gold prices always lower than those in the global market.

In the first half of this year, gold export turnover is estimated to have reached US$1 billion, keeping trade deficit down at US$ 6.65 billion.

The stable exchange rates and increasing interest rates in recent times have sent interest rates on mobilized loans soaring, even up to 19 percent/year at some point.

The SBV has asked credit organizations to keep credit growth at below 20 percent during the whole year and provide credit capital for production and business, agriculture and rural development, exports and small and medium sized enterprises.

It has announced that it would dully deal with credit organizations intentionally pushing credit growth up to more than 20 percent in 2011.

However, many businesses are still worried about how long such interest rates will be maintained.

Despite some positive signs of development in the domestic monetary market on account of decreasing bond and inter-bank interest rates, the SBV seems still unable to lower interest rates in the open market and re-supply and re-discount capital.