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SBV: Foreign exchange reserves may hit $50bn

Released at: 15:06, 26/12/2017

SBV: Foreign exchange reserves may hit $50bn

Illustrative image (Source: giavang.net)

Central bank may add to existing $48 billion in reserves over remaining days of 2017.

by Quang Huy

Vietnam’s foreign exchange reserves stand at $48 billion and may exceed $50 billion this year, according to the State Bank of Vietnam (SBV).

After net buying $8 billion since the start of this year, the central bank expects to purchase more over the remaining days of the year given the large supply of hard currency, driven by the government’s large-scale divestment from State-owned firms, share sales by domestic companies that have drawn active participation by foreign investors, and robust overseas influxes into the local stock market. 

Recently, the country’s largest brewer, the Saigon Beer Alcohol Beverage Corporation (Sabeco), sold more than 343 million shares, or a 53.59 per cent stake, at auction, with a total value nearing $5 billion. Payments to the Ministry of Industry and Trade are expected to be completed on December 28.

Vietnam has been quickly building up its foreign exchange reserves over the last two years, ensuring lenders have liquidity to lend at lower interest rates without having to cut the central bank’s policy rates.

The SBV was one of only a handful of Asian central banks to ease monetary policy this year, unexpectedly cutting its benchmark interest rate for the first time in three years, in July.

After a series of devaluations in 2015, Vietnam’s central bank moved to a more market-based framework of setting the currency last year, adjusting the Vietnam dong’s reference rate on a daily basis.

The method has effectively kept the currency stable and allowed the government to focus on boosting growth. Despite the US Federal Reserve’s third interest rate hike this year, in mid-December, the USD/VND rate has been stable and even moved slightly downward over recent days, with the reference rate on the interbank market last week being VND22,710, whereas commercial banks have quoted VND22,745-22,750.

One factor that also helped boost foreign reserves this year was an increase in remittances from Vietnamese living abroad. Inbound remittances to Ho Chi Minh City, Vietnam’s largest economic hub, surpassed $4.55 billion in the first eleven months of the year, with over 60 per cent coming from the US and 19 per cent from Europe. “At this pace, Ho Chi Minh City will likely receive $5.2 billion in remittances this year, up 4.5 per cent from 2016,” he added.

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