After being forced to sell a sizable amount of US dollars earlier this year to maintain the dong, Vietnam's central bank announced on Tuesday that it was taking measures to strengthen foreign exchange reserves by purchasing more of the greenback.
Without going into further detail, Dao Minh Tu, the central bank's deputy governor, stated at a news conference that "there have been positive signals on the foreign exchange market that allow the central bank to continue its purchases of foreign currencies."
The amount of Vietnam's foreign exchange reserves is not regularly disclosed. It estimated the amount at $100 billion in late 2021.
The State Bank of Vietnam (SBV) was forced to sell a sizable amount of US dollars to the market earlier this year in order to support the dong, which has fallen to record lows recently as a result of capital outflows brought on by the US Federal Reserve's repeated interest rate increases to control inflation.
Market analysts estimated that the SBV had sold about $20 billion.
Strong inflows of foreign direct investment and a sizable trade surplus this year have slowed the dong's decline against the dollar, which has fallen by approximately 3% so far this year.
Tu added that non-performing loans in the banking sector were under control and that the inflation rate should be below 4% in 2022.
The SBV stated earlier on Tuesday that it will flexible manage monetary policy to keep inflation at 4.5% in 2019, with the goal of "stabilizing the monetary and foreign exchange markets to ensure the safety of the banking system."
According to the report, lending by Vietnamese banks increased 12.87% as of December 21 compared to December 31, 2020.
Following a credit crisis in the real estate sector and its financial markets, the central bank lifted its 14 percent cap on credit growth for the banking system this year by 1.5 to 2.0 percentage points at the beginning of the month.
With robust manufacturing and exports supporting one of Asia's fastest-growing economies, Vietnam's gross domestic product is expected to expand by 8% this year. Strong credit growth is also a major factor in its economic expansion.
The country is anticipated to have a $11 billion trade surplus this year.
Foreign direct investment inflows are anticipated to increase by 13.5% from last year to $22.4 billion, the government stated on Tuesday.
By fLEXI tEAM