To support Vietnam’s coronavirus-hit economy, the State Bank of Vietnam (SBV) cut its policy rates on March 16, with the new rates taking effect as of March 17.
The refinancing rate will drop from 6% to 5% and the discount rate from 4% to 3.5%, the SBV announced in a statement posted on its website.
The bank stated that the rate cuts were in line with the country’s “macroeconomic conditions and international financial markets”. SBV Deputy Governor Dao Minh Tu added the move was also intended to help lenders cut their own lending rates to support their customers during the coronavirus epidemic.
As well, the one-month term deposit interest rate for the Vietnamese dong was reduced to 0.5% from 0.8%, and the one-to-six-month term deposit cut to 4.75% from 5%.
The SBV move came less than 24 hours after the US Federal Reserve cut its benchmark interest rate to a target range of 0% to 0.25% from a range of 1% to 1.25%.
Vietnam’s central bank made its last benchmark rate cut, 0.25 percentage points, in September of last year. And, before the coronavirus outbreak, late last year, Vietnam’s National Assembly forecast the nation’s 2020 economic growth would be 6.8%.
Now, with the virus causing so much economic disruption, the government via the banking sector is seeking solutions to lessen its consequences.
Nguyen Quoc Hung, director of the SBV’s credit department, has said commercial banks in the country have adopted measures to support the country’s virus-hit enterprises. An estimated 44,000 affected firms and individuals, who had taken out loans totalling 222 trillion dong (US$9.6 billion), have benefited from various credit initiatives, including interest rate cuts, loan repayment delays and fee reductions.
Earlier this month Nguyen pointed out that Vietnamese commercial banks had pledged to offer a combined credit package worth 285 trillion dong (US$12.3 billion) to help affected businesses. Later he updated his remarks stating that more commercial banks had joined the initiative and that the banking sector was expected to provide adequate capital to keep the economy going.