HANOI, March 9 (Reuters) - Slowing inflows of foreign currency deposits at banks coupled with a drop in Vietnam’s exports have cut into the funds used for honoring import contracts and prompted the government to plan a sale of dollar bonds.
The first issue would come before March 15 to boost reserves and help repay imported equipment for power plants, Deputy Finance Minister Nguyen Cong Nghiep was quoted on Monday as saying by the weekly Vietnam Investment Review.
Nghiep did not give the size of the issue but a ministry source told Reuters last week the government planned to raise $1 billion in several tranches. [ID:nHAN485478]
The source said the bond would probably be issued later in the month or in early April.
The State Bank of Vietnam’s monthly report said January to February bank deposits in foreign currencies, mostly in U.S. dollars, rose only 1.13 percent from the end of 2008.
The report did not give any reason for slowing inflows, but banks have cut dollar deposit rates by between 0.2-0.5 percentage point from the end of last year, the central bank said. It noted that interbank funds were sufficient.
Banks are now paying between 2.8 percent and 3.2 percent for 12-month dollar deposits.
Fixings on rates on interbank dollar loans for terms from one week to two months gained 0.01 to 0.04 percentage point on Monday, according to Reuters data VNIBOV1.
The highest rise was on one-week loans, with the rate climbing to 0.79 percent from 0.75 percent last Friday.
The government’s statistics office reported exports in the first two months of this year dropped 5 percent from a year earlier to $8.02 billion.
Foreign direct investment pledges in the two-month period stood at $1.51 billion, less than a third of the pledges for the same period last year of $4.89 billion, Planning and Investment Ministry reports said.
On the interbank market, "banks tended to keep the dollar/dong rate VND= close to the ceiling", the central bank said in its weekly report on the money market ending March 4.
On Monday, the dollar was quoted at 17,481 dong which was at the top end of the 3 percent band around the mid-point set by the central bank in which it is allowed to trade. The central bank’s mid-point on Monday was 16,972 dong.
The central bank has kept the dong stable this year against the dollar, allowing the mid-point to fluctuate up or down by only a few dong.
Several economists have said Vietnam should devalue the dong to around 18,000 per dollar to boost exports.
ANZ’s monthly economic report for March forecast the dong would fall to 17,800 per dollar in June and 18,500 by December. (Reporting by Ho Binh Minh; Editing by John Ruwitch)
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