With the central bank’s helping hand, local banks are enjoying more fluid liquidity.

Monetary policy management is taming inflation and revving up the national economic recovery. That was the message from Prime Minister Nguyen Tan Dung during last week’s meeting with the State Bank.  

The premier said an appropriate monetary policy had contributed to the impressive gross domestic growth (GDP) of 5.8 per cent in 2010’s first quarter.

The country’s price pressures have eased in April. According to General Statistic Office (GSO) data, April consumer price index (CPI) rose just 0.14 per cent against March. On aggregate, by end of April, the CPI increased by 4.27 per cent against the end of 2009.

“The central bank should continue to manage monetary policies in a flexible manner to secure 6.5 per cent GDP growth this year and control inflation,” Dung said. Earlier in April, the government issued Directive 18/NQ-CP, setting the year’s credit expansion target at 25 per cent and total liquidity growth at 20 per cent.

In 2009, the initial credit growth target was 30 per cent, but it turned out to be 37.72 per cent by the end of 2009. High credit growth was considered the major cause of inflation. By the end of the first quarter, the local banking system’s total liquidity had increased by 2.3 per cent, while credit had been expanded by 2.95 per cent against the end of 2009.

Dung also requested that the State Bank bring down market lending rates to better support local businesses. Local banks’ lending rates are now around 15-17 per cent, per year. Governor Nguyen Van Giau said that the central bank had assisted the local banking system in ensuring liquidity. Local banks are currently mobilising at 11-13 per cent per year, while borrowing costs from the State Bank are just 8 per cent.

According to a State Bank source, the central bank was considering extending the lending term for banks, as the early May due date was drawing near.

The State Bank’s weekly report released last week read interest rates on the inter-bank market, where local lenders borrow each others’ short-term funds, had continued falling by 0.2-0.7 per cent per year.

Three-month loan interest rates showed the most declines, falling from 11.56 to 10.81 per cent, per year. Meanwhile, one-month loan interest rates had also fallen from 10.18 to 9.48 per cent, per year. “This meant that the banking system’s liquidity is improving,” said Duong Thu Huong, general secretary of Vietnam Banking Association.

Source: VietnamNet/ VIR