Vietnam needs to make sacrifice for exchange rate stabilization
VietNamNet Bridge – The heavy fluctuations of the exchange rate would badly affect the national payment balance. Experts say if Vietnam has to choose one of the two – the gold price stabilization and exchange rate stabilization – it would have to sacrifice the gold price in exchange for the stabilized dong.
At 3 pm of November 7, the world gold price reportedly stood at 1,725 dollars per ounce, or 43.40 million dong per tael. Meanwhile, Vietnamese SJC brand gold reportedly climbed to 47.06 million dong per tael. The big gap of 3.7 million dong per tael between the domestic and the world gold prices has been existing for a long time.
However, the State Bank of Vietnam has affirmed that despite the big price gap, this has not had big impacts on the dong/dollar exchange rate with the dollar price stabilized at 20,880 dong per dollar over the last few months.
According to Truong Van Phuoc, General Director of Eximbank Vietnam, policy makers have to choose either the gold price or the exchange rate stabilization, and one of the two needs to be sacrificed for the other.
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Phuoc believes that the State Bank of Vietnam has done very well in stabilizing the exchange rate so far.
“If the exchange rate fluctuates too heavily, this would have negative impacts on the national payment balance and the trade balance,” Phuoc said. “It would be very good if the gold price can be stabilized. However, if both the goals are unattainable, the central bank needs to prioritize the stabilization of the exchange rate.”
Regarding the central bank’s decision to choose SJC as the national gold brand, Phuoc said that the bank does not mean to create the enterprise monopoly. In fact, SJC products have been dominating the domestic market with 90-95 percent of market share.
The State Bank chooses SJC for the national gold brand because it aims to control the gold stamping machine, while striving to prevent the illegal gold import which once put a hard pressure on the exchange rate.
Nevertheless, Phuoc has pointed out that the central bank has not done well in explaining its policy to the public. The information that SJC becomes the national gold brand has led to the misunderstanding that non-SJC gold would be refused.
As a result, people rushed to sell non-SJC gold to buy SJC brand bullion gold for hoarding, thus causing a chaos on the market, while creating artificial SJC brand gold demand.
Director of a gold trade company in HCM City has agreed that the State Bank has done well in stabilizing the exchange rate.
In the past, the big gap between the domestic and the world gold prices would prompt speculators to collect dollars on the black market to import gold illegally for domestic sale for profit.
However, the director said, though the domestic price is much higher than the international price, the illegal import and the dong depreciation have not occurred.
Nguyen Hoang Minh, Deputy Director of the HCM City Branch of the State Bank of Vietnam, said in the immediate time, the central bank does not intend to intervene in the gold price by selling gold at low prices to force the prices down.
The State Bank has also vowed to take necessary measures to fight against the so called “goldenization.” Banks have been told not to accept gold deposits, while people would sell gold instead of depositing to make profit.
US$1 = VND21,000