Vietnam's markets were still skeptical of the government's commitment to a policy shift toward stability and therefore further monetary tightening was needed, the Asian Development Bank's country director said on Tuesday.
The State Bank of Vietnam devalued the currency late last month and raised interest rates by 100 basis points on Dec. 1, part of a series of coordinated moves that was widely interpreted as a clear shift toward a policy more focused on macroeconomic stability which came sooner than most observers had expected.
"Unfortunately, it seems that the market still remains to be a bit sceptical about the commitment of the government in moving more towards stability," Ayumi Konishi told reporters.
"If the market still doesn't fully appreciate the stance of the government then that will call for the government to take additional monetary tightening measures to really make this point clear, that government policy is changing toward stabilisation."
Konishi, speaking to reporters after signing a loan agreement with the central bank to support secondary education, added that he would not be surprised if the central bank moved to tighten policy again "in the very near future".
He declined to say by how much he would like to see interest rates rise in the next move.
In addition to the devaluation and the rate hike, the government asked big exporters to sell dollars in their accounts to help ease a shortage that has lasted most of the year, and the central bank narrowed the trading band for the dong and renewed its threats on illegal foreign exchange transactions.
The Vietnamese economy is highly dollarised, and while the policy measures brought the exchange rate back into its band on the interbank market, liquidity dried up.
Dong liquidity in the banking system has fallen as year-end demand is rising, and the central bank has been pumping record amounts of money into the system through open market operations.
Meanwhile, short-term lending rates in dong had risen sharply in the past week and were expected to remain high.
Inflation has been mild this year compared to 2008, when it averaged about 20 percent, but it has been accelerating and some economists expect it to reach double digits by the middle of next year.
Konishi said the fate of the Vietnamese economy in 2010 to a large extent hinged on what happens to external demand as the global recovery seeks purchase.
POST YOUR COMMENT
City & Country
Phone Number
We will not publish
your email or full address on our website, or give them to a third party.
Tags:
Vietnews is not responsible
for the content of external Internet sites.