The public has been surprised after Dr. Nguyen Duc Thanh, head of the Vietnam Institute for Economic and Policy Research (VEPR), announced that Vietnamese overseas deposit was inconsiderable formerly but suddenly rocketed up to US$7.3 billion in the third quarter last year.
Citing reports by the State Bank of Vietnam (SBV), Dr. Thanh said that local credit institutions deposited about US$6 billion abroad and other organizations deposited $1.9 billion, totaling $7.9 billion by the third quarter.
The number is $7.3 billion after deducting other flows of funds being poured into Vietnam at the same time. Mr. Thanh said the surge unusual because it was a minus number during the same period in previous years when the overseas deposits approximated $2 billion.
According to Dr. Nguyen Xuan Thanh, director of the Fulbright program, the figure should be understood to be Vietnam’s property or abroad short term deposits of Vietnamese banks and other organizations which could be withdrawn whenever they need.
Clarifying the information, head of SBV’s Monetary Forecasting and Statistics Department To Huy Vu said the $7.3 billion overseas deposits was true. However, it comprises not only overseas savings by local banks but also loans for foreign debt payments in short, medium and long terms of the economy.
Statistics on the balance of payments in the third quarter 2015 showed that local commercial banks sent $5.9 billion abroad. Because the banking system plays financial intermediary role, the number regularly and continuously fluctuates and exactly show the economy’s changes.
Besides money and deposits of credit institutions, the balance of payments also comprises those of other sectors including businesses and organizations which totaled $2 billion in the third quarter which was no unusual fluctuations over previous quarters.
Mr. Vu attributed the overseas deposit surge to the trend of keeping foreign currencies by local businesses and residents, which has been caused by the drastic depreciation of the Yuan in August last year and speculations on the dollar interest rate increase by the Federal Reserve System. These have accelerated the pressure on the Vietnamese dong to US dollar exchange rate.
When foreign currency deposits of economic organizations and residents highly hiked, commercial banks pay these funds into foreign bank accounts amid the reduction of foreign currency credit is very ordinary in banking activities.
After SVB making swift reactions via exchange rate policies which has again stabilized the market, residents and businesses’ psychology was relieved and the banks’ overseas deposits increased only $369 million in the fourth quarter, he added.
Related to some experts’ concerns about foreign currency liability traps to the economy, Mr. Vu reaffirmed that the banking system is a financial intermediary. It is normal for them to mobilize foreign currency deposits from economic organizations and residents and increase their overseas deposits when the domestically used amount of funds is low.
Banks just keep a part of foreign currencies in cash to serve residents’ demand, the rest amount they can invest under forms meeting regulations in the law on forex management. Overseas depositing aims to ensure the liability and meet payment demand of businesses and residents, Mr. Vu stressed.
Overseas deposits amount to US$7.3 billion