The Governor of the State Bank of Vietnam explains the reason for suspending the gold auction.

On the afternoon of May 29th, in a statement clarifying the opinions raised by National Assembly deputies during the discussion on the socio -economic situation and the State budget, the Governor of the State Bank of Vietnam (SBV), Nguyen Thi Hong, stated that these are issues that the Government and the Prime Minister are resolutely directing to be resolved.

According to Ms. Hong, in the context of general difficulties, countries have to sacrifice growth when controlling inflation, but Vietnam has achieved both: controlling inflation and recording growth - although not to the target set by the National Assembly, but compared to other countries in the region and the world , this is a relatively high growth rate.

"This is a bright spot that has been highly appreciated internationally," the Governor of the State Bank of Vietnam emphasized.

Governor of the State Bank of Vietnam Nguyen Thi Hong

In the first five months of 2024, Vietnam's macroeconomic and monetary situation remained stable. However, there were developments that the Government was closely monitoring and addressing.

Firstly, the exchange rate is under upward pressure. This is a common trend in countries around the world and in the region, with many currencies in the region also depreciating at a relatively high rate.

The State Bank of Vietnam (SBV) assesses that, in a volatile global economic environment, "exchange rates fluctuating up and down is perfectly normal." Following the government's directive to stabilize the exchange rate and foreign exchange market, the SBV has closely monitored and implemented a comprehensive set of policy solutions to regulate the monetary policy and intervene, ensuring a sufficient supply of foreign currency for businesses importing goods and for domestic production.

The Governor of the State Bank of Vietnam believes that, in the coming period, the recovery of domestic production and exports will contribute to supporting the supply and demand of foreign currency. In particular, when there are fluctuations and increases in the USD exchange rate, businesses will also increase their forward purchases of USD, thus potentially reducing the demand for foreign currency in the future.

"The US Federal Reserve (FED) is expected to lower interest rates by the end of 2024. Many forecasts also suggest that the USD exchange rate will cool down by the end of the year. The State Bank of Vietnam continues to closely monitor market developments to reassure businesses," Ms. Hong said.

Regarding the issue of low credit growth, which has been mentioned in many previous meetings, according to the leaders of the State Bank of Vietnam, this is not only a trend in Vietnam but also a general trend worldwide as countries implement tight monetary policies. In recent times, following the Government's directives, the State Bank of Vietnam has also implemented many solutions to support and promote credit growth.

According to the Governor of the State Bank of Vietnam, low credit growth has many causes, among which many National Assembly deputies pointed out that the reasons include difficulties related to export output, domestic consumption, and sectors with large loan volumes such as the real estate market, which are currently facing legal issues.

"From the perspective of monetary policy management, the State Bank of Vietnam (SBV) sees that the Government has recently intensified the promotion of public investment and investment in highway infrastructure. This is a very correct and effective policy, because when the capital absorption capacity of businesses is weak, it is necessary to boost public investment and infrastructure investment to create a ripple effect of capital flow to businesses. From there, reactivate credit for the banking system. In addition, the SBV has repeatedly reported and recommended that since 95% of businesses in Vietnam are small and medium-sized enterprises, there should be solutions to strengthen credit lending, such as guaranteeing loans for businesses when borrowing from banks, in order to boost credit," Ms. Hong said.

On the afternoon of May 29th, the National Assembly continued its discussion on the socio-economic situation and the State budget.

According to Governor Nguyen Thi Hong, another issue of concern to the delegates was the need to increase interest rates on foreign currency deposits to attract more people. Ms. Hong stated that over the years, the State Bank of Vietnam has implemented numerous measures to combat "dollarization" in accordance with the Party and State's policy. Simultaneously, it has collaborated with various ministries and agencies to control inflation and increase the value of the Vietnamese Dong, making it more attractive and eliminating the benefits of hoarding USD.

"Therefore, bringing USD interest rates down to 0% is one of the solutions to encourage people with foreign currency to sell it to credit institutions, and for credit institutions to sell it to the State Bank of Vietnam to increase the State's foreign exchange reserves. This will create room to intervene in stabilizing the foreign exchange market, similar to the situation in 2022 and the first few months of 2024," Ms. Hong said.

Regarding the gold market, the State Bank of Vietnam believes that the high and volatile gold prices are a common trend in countries around the world, not just in Vietnam. Domestically, gold prices move in the same direction as world gold prices; however, the price difference between domestic and international gold has widened, especially for SJC gold.

"The government has directed the State Bank of Vietnam (SBV) and relevant ministries and agencies to carry out their functions according to Decree 24 to narrow the gold price gap. This is also a challenging task because international gold prices continue to fluctuate significantly and are complex. In light of this situation, the SBV has increased the supply to the market. Building on the approach from 2013, the SBV conducted auctions to increase the supply of gold to the market, aiming for a gradual decrease in gold prices. However, after nine auction sessions, the reduction in the gold price gap did not meet expectations. Therefore, we have stopped the auctions, reassessed the situation, identified the causes, and developed a new plan to implement next week. In particular, we will also ensure transparency in gold transactions on the market," Governor Nguyen Thi Hong affirmed.

The State Bank of Vietnam's leadership affirmed that they have organized an inter-agency team to conduct a comprehensive inspection covering all aspects, from invoices and documents to anti-money laundering related to gold transactions, and combating speculation, hoarding, and price manipulation.

Also clarifying and explaining opinions related to gold prices, Deputy Prime Minister Le Minh Khai said that since June 2022, the Government and the Prime Minister have closely directed the State Bank of Vietnam with 25 documents, including tools to intervene in order to stabilize the gold market. Simultaneously, inspections, audits, and controls have been conducted.

According to the Deputy Prime Minister, the State Bank of Vietnam (SBV) has recently been proactive in implementing solutions; however, the effectiveness of these interventions has not been high. Currently, the SBV is reassessing the situation and will develop new plans to stabilize the gold market in the short term.

In the long term, Deputy Prime Minister Le Minh Khai suggested that the State Bank of Vietnam study amending Decree 24: "In the short term, we should use state management tools such as inspection and supervision to realistically assess the operation of the gold market. From there, we can develop solutions to handle issues according to regulations, to stabilize the domestic gold market in line with the National Assembly's desire to move closer to the world market."

Source: https://vov.vn/chinh-polit/thong-doc-ngan-hang-nha-nuoc-neu-ly-do-dung-dau-thau-vang-post1098248.vov