Vietnam Will Provide Funds to Banks to Spur Credit Growth

Vietnam’s monetary authority will inject funds into commercial banks to spur lending after credit growth missed targets amid a slowing economy.

“Credit growth has been very slow so far this year,” Nguyen Thi Hong, head of the central bank’s monetary policy department, said in an interview in Hanoi today. The regulator will “provide funds to banks that have the potential to make good loans but face difficulties with funding,” she said. Lenders can access funds through daily open-market-operations or loans using bonds and bills as collateral, she said.

Vietnam’s bank lending has stagnated as businesses contend with growing inventories and decreased demand. The country’s inflation, once the fastest in Southeast Asia, has since eased, giving the central bank room to reverse monetary tightening and cut interest rates five times this year to shield the economy from Europe’s debt crisis and China’s growth slowdown.

Credit growth was 1.07 percent as of Aug. 8, according to a release from the central bank today. That compares to the regulator’s target of 14 percent to 15 percent in 2012.

Deputy Prime Minister Vu Van Ninh has said the country may miss its 6 percent growth target after the economy grew 4.66 percent in the three months to June from a year earlier. Consumer prices may rise in August from July because of higher power and fuel costs, the Ministry of Finance said yesterday.

The central bank will “closely watch” the pace of inflation, the dong’s exchange rates and fuel prices to “adjust” borrowing costs to balance between growth and inflation targets, Hong said today.

To contact Bloomberg News staff for this story: Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net