Banks struggle with scarce dollar supply

A US dollar supply shortage is looming as banks in HCM City are scrambling for more dollar funds. 

According to a report on foreign exchange by the HCM City branch of the central bank, banks now buy dollars mostly from one another with a proportion as high as 47 percent. The amount of dollars they buy from businesses accounts for only 40 percent, from the central bank 3 percent, and from other sources such as remittances the remainder.

A majority of State-owned commercial banks' branches in the city are even seeking help from their head quarters in Hanoi to cope with the dollar shortage.

The high September consumer price index of 1.31 percent and the depreciation of the dong against the greenback have made enterprises anxious about forex risk, so they have chosen to hold on to dollars to be on the safe side. Meanwhile, companies are scouting for dollars to pay for imported goods and settle foreign debt, thus making the supply scarce.

Banks' interest rates for the dollar and gold have inched up and the gold price has beat the 33 million per tael level. These factors have led depositors to shift to keeping dollars and/or gold instead.

To reduce the trade deficit and address high dollar demand, the central bank has asked commercial banks to limit US dollar and dong lending to importers of goods that are produced in Vietnam. In the first nine months of this year, HCM City banks' credit growth for the US dollar grew a staggering 36.4 percent while credit growth for dong was a slight 9.4 percent from late last year.