VietNamNet Bridge - Contrary to predictions, businesses have remain unruffled though they have been told to stop borrowing money in foreign currencies in the second quarter.

The State Bank’s Circular No 24 stipulates that some groups of businesses can only borrow in foreign currencies until the end of the March.

Many businesses prefer borrowing in foreign currencies to Vietnam dong because the dollar loans’ interest rates are always lower than dong. 

Though the businesses need dong to make payments domestically for expense items, they would rather borrow in dollar, then convert the dollar for Vietnam dong.

The central bank believes now is the right time to stop this to ease the so-called ‘dollarization’ in the national economy.

Businesses said they will be unhurt by the decision.

Contrary to predictions, businesses have remain unruffled though they have been told to stop borrowing money in foreign currencies in the second quarter.

Ha Thu Giang, director of CG Technology and Trade Promotion, said with the exchange rate policy applied in the past, dollar borrowers would get benefits if the dong was devalued sharply. 

However, nowadays, with the preferential prices offered by banks, prestigious businesses can borrow in Vietnam dong at the interest rate of 7-8 percent only. This means that borrowing dollars and dong both will bring the same value to businesses.

Hoang Phuong Thuy, director of Royal Bright Development, confirmed that there is no difference between borrowing in dollars and in Vietnam dong because businesses now can borrow dong at reasonable interest rates. 

Meanwhile, the businesses operating in the five groups of priority business fields can borrow dong at the interest rate of 6-7 percent per annum. 

“You should borrow in dong if you need dong to cover your expenses. In case you need dollar, you can use banks’ currency exchange service at a preferential fee,” an analyst said.

“The service fee is insignificant, while the profit you can expect from export contracts will be satisfactory enough,” he said. “The new regulation will familiarize businesses with the habit of borrowing and using dong in Vietnamese territory "

Ngo Minh Hien, director of Nam Can Seafood JSC, explained that in the past, with the old exchange rate policy, export companies can get benefits when the State Bank devalued the dong by 1-2 percent. 

However, the State Bank applies the new exchange rate policy under which thevdong price can be adjusted daily. Therefore, there are not many opportunities for businesses to exploit.

Hien said he still cannot see all the possible impacts of the new management mechanism because the new mechanism has just been applied for the last two months, while his company does not need dollars in the last two months. 

However, there is not a big difference between the dong and dollar interest rates. 


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