Vietnam’s monetary policy is being asked to do more than ever: fund double-digit growth, lower borrowing costs, contain inflation, stabilize the exchange rate and safeguard the banking system. The difficulty is that these goals do not always move in the same direction.

At an August 13 meeting with the State Bank of Vietnam (SBV) and credit institutions, Prime Minister Le Minh Hung called on policymakers to continuously quantify the “balance point” between controlling inflation and supporting growth, allowing interest rates, the exchange rate, money supply, liquidity and credit to be adjusted at the right time and in the right measure.

That balance is becoming increasingly difficult to find.

Policymakers look for room to maneuver

One notable choice in the first seven months of the year was the SBV’s decision not to cut its policy rates to stimulate growth.

Monetary policy, however, has remained flexible.

When the banking system needed additional liquidity, the central bank injected funds through open-market operations, increased the volume of its offers and extended maturities to as long as 91 days. Foreign-exchange swaps were also used to add liquidity.

The approach suggests that policymakers are trying to put more money into the banking system and create conditions for lower lending rates without resorting to policy-rate cuts.

More room has also been created for credit expansion.

By July 31, outstanding loans had reached VND20.26 quadrillion, or about $770 billion, up 8.98% from the end of 2025.

Certain loans have been excluded from credit-growth quotas. The share of short-term funding that banks are allowed to use for medium- and long-term lending has been raised from 30% to 40%, while the proportion of State Treasury deposits included in the loan-to-deposit ratio calculation has increased from 20% to 50%.

The economy’s appetite for capital is enormous.

Around 35 major and nationally important projects alone are estimated to require roughly VND1.7 quadrillion, equivalent to about $65 billion, in loans.

The Prime Minister has also instructed policymakers not to treat the 2026 credit-growth target as a “hard ceiling” at all times. But additional capital must reach the right sectors, at the right time, for the right borrowers and purposes, and at a reasonable cost.

Even as the authorities seek to expand financing for the economy, they must continue to maintain exchange-rate stability. Foreign-exchange reserves have risen slightly year on year and remain broadly equivalent to their level at the end of 2025.

Credit growth itself is relatively easy to measure.

The more important question is where that money ultimately goes - and how much economic growth it actually produces.

The limits are becoming harder to ignore

Expanding credit comes with an immediate constraint: deposits are growing more slowly than lending, while much of the funding available to banks is short term.

Deposits with maturities of one year or longer are estimated to account for only around 20% of total deposits, while medium- and long-term loans represent about 47% of outstanding credit.

Raising the proportion of short-term funds that banks can use for medium- and long-term lending from 30% to 40% provides additional lending capacity in the near term.

But it also increases maturity risk.

The contradiction is becoming increasingly visible.

Credit needs to expand. Businesses need cheaper loans. Yet banks still need to attract sufficient deposits at a time when both deposit and lending rates are under pressure to fall.

Where the additional credit flows is another concern.

Official sources indicate that real-estate lending is expanding rapidly. That makes the principle that “scale must go hand in hand with quality, and credit growth with risk control” particularly important.

Inflation and the exchange rate impose further limits.

Average consumer price inflation in the first seven months has reached 4.39%, already close to the full-year target of around 4.5%.

External conditions offer little relief.

The US Federal Reserve has yet to cut interest rates, while US inflation has not cooled as much as expected.

That means any significant reduction in Vietnamese interest rates must also be weighed against potential pressure on the exchange rate and capital flows.

The challenge, therefore, is not simply whether Vietnam can inject more money into the economy.

It is how far it can do so without creating vulnerabilities elsewhere.

Banks cannot carry the burden alone

That is why Decision 1413/QD-TTg, issued on July 27, 2026, sets the goal of developing a financial market with a more “balanced and appropriate structure,” in which capital markets play a greater role in supplying medium- and long-term funding to the economy.

The direction is relatively clear.

Vietnam needs to expand fundraising through public equity and bond issuance while developing a deeper base of long-term institutional investors, including investment funds, pension funds and insurance companies.

As these channels grow, part of the economy’s long-term financing needs can shift away from banks.

That structural change matters because Vietnam’s ambition is not simply to deliver one year of exceptionally high growth.

If double-digit growth is to be sustained for years, demand for capital will continue to increase.

And the greater that demand becomes, the less sustainable it will be to place most of the burden on monetary policy and the banking system.

There is ultimately no single interest rate, credit target or liquidity injection that can resolve all of these competing pressures.

The “balance point” Vietnam is searching for may therefore lie less in how aggressively monetary policy is loosened than in the structure of the financial system itself: ensuring enough capital is available at reasonable cost to support growth, without paying for it through higher inflation, exchange-rate instability or greater risks to the banking system.

Tu Giang