Loan repayment may strain dollar supply

TN News

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Concerns over dollar supplies are mounting as local businesses begin to purchase the currency to repay their loans.

Le Xuan Bach, director of Vinh Hoang Xuan Trading Company, said access to dollar loans had eased since the end of last year.

Because interest rates were low compared with the rates on dong loans, many companies have taken out dollar loans to do business, Bach said in a report on VietnamNet news website on Wednesday.

"My company borrowed nearly US$2 million and the loan is due soon. As the exchange rate is now stable, we are buying dollars for repayment," Bach said, noting that the dollar often gets stronger toward the end of the year.

Several lenders, including Asia Commercial Bank and VIB Bank, said many businesses will have to repay their dollar loans from now until October. As a result, demand for the greenback has started rising recently.

Analysts warned that the higher demand will put pressure on the dollar supply. While exporters do not have to worry much about finding dollars, other companies will have more difficulties with repayment, they said.

Economist Chu Viet Anh from the State Bank of Vietnam said the dong/dollar exchange rate was often tense at the end of the second quarter. When combined with widening trade deficit and increasing inflation, dollar loan repayment will create more pressure on the currency supply this year, he said.

The State Bank of Vietnam last week asked commercial banks to restrict dollar loans, requiring them to report on the amount of foreign money they sell and lend to importers on a weekly basis.

Loans rose 1.86 percent in May alone, during which period dollar loans rose 3.16 percent, according to the central bank. Dollar loans had already expanded 14.07 percent in the first quarter.

The dollar rose 0.41 percent from December in the first six months, up 7.67 compared to the same period last year, the General Statistics Office said.

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