HCMC – The State Bank of Vietnam has expressly said it would choke off funds for non-manufacturing sectors as part of the credit tightening policy endorsed by the Government to fight inflation.

In a statement on the central bank’s website, Deputy Governor Nguyen Van Binh said the State Bank would manage solutions to restrain the credit growth lower than 20%, and much of the funds will go to manufacturing, agriculture, export, supporting industries, and small and medium enterprises. That means capital for non-manufacturing areas will be minimized.

The central bank’s announcement is meant to implement the Government’s resolution on fighting inflation and stabilizing the macro economy.

To implement the plan, the central bank will flexibly deploy monetary policies focusing on interest rate, opened market operations, refinancing, and compulsory reserve to regulate money supply and liquidity in the system, with an aim to check the growth of money supply at 15%-16% this year.

Binh said the central bank would ask commercial banks to readjust and then re-register their 2011 credit growth plans based on adequacy ratio and ensuring the system’s credit growth target of less than 20%. In addition, the central bank will issue regulations on corporate bonds investment to ensure that banks cannot breach the credit limit by giving loans under the form of buying corporate bonds.

The State Bank of Vietnam will also flexibly adjust the ratio on risk provisions and other safety ratios to drain the capital into important manufacturing operations of the economy.

The State Bank of Vietnam will also modify regulations on giving loans in foreign currencies to control the dollar credit growth at about 20%, and such funds must also focus on manufacturers whose operations generate income in foreign currencies.

To manage the foreign exchange market, the deputy governor said, the central bank will also tighten control on the use of foreign currencies, limiting loans  or sales of the dollar to enterprises to import non-essential goods. The authority will also strictly manage the usage of international payment cards as well as the transfer of dollars to foreign countries by individuals and institutions.

The State Bank of Vietnam will cooperate with the Finance Ministry and the Ministry of Planning and Investment to strictly manage outbound investment as well as the act of institutions to borrow money from foreign countries.

The Saigon Times Daily