A new report that found a surge of dollar savings moving overseas has cast doubt on the central bank's forex policy, showing recent interest rate cuts aiming to drive depositors toward the local currency may have backfired.
In its recent report on Vietnam's economy, the Hanoi-based Vietnam Institute for Economic and Policy Research said Vietnamese offshore savings were previously small, but have increased "sharply" recently to US$7.3 billion at the end of the third quarter last year.
The rise, described as "unusual," is a key factor that caused a deficit of $6.6 billion in the national balance of payment, according to the report.
Nguyen Duc Thanh, director of the institute, said since the central bank cut interest rates on US dollar deposits to zero last year, it has not stopped people from keeping dollar savings.
In fact many were still hoping to profit from a stronger dollar, despite zero interest, and decided to keep their savings in banks but under no fixed terms, Thanh said.
That became a problem for banks and their dollar liquidity because they could not use such savings for loans, he said.
As a short term solution, these banks chose to send money offshore to at least earn some interest, he said, adding that banks accounted for most of the savings overseas.
Vietnamese will possibly continue to deposit dollar abroad, if the central bank does not take measures for increasing people's confidence in the dong, he said.
In a recent interview with news website Dau Tu, the vice chairman of the National Financial Supervisory Commission, Truong Van Phuoc, said despite the zero deposit rates, dollar savings kept increasing.
Official figures showed the US dollar deposits in Vietnam grew 14.3 percent year on year at the end of last year, compared to 4.7 percent recorded in 2014, Phuoc said.
A "strong" rise was recorded in last year's last quarter when the central bank abolished interest rates, he said.