Despite the government's efforts to minimise the dollarisation of the economy, the public have continued making deposits in US dollars because of fear over inflation and unstable policies.
USD deposits increase
According to Truong Van Phuoc, deputy chairman of the National Financial Supervisory Commission, VND deposits grew at 16.3 percent in 2015, lower than previous year's 19.3 percent. Meanwhile 2015's USD deposit growth rate of 14.3 percent was higher than previous year's 4.7 percent.
Last December, the State Bank of Vietnam lowered deposit rates on USD to zero to provide an incentive to turn to dong savings. The move followed the US Federal Reserve increasing short-term interest rates to 0.25-0.50 percent. Despite the lack of value, many people have continued to maintain their savings in dollars and US dollar deposits have actually increased.
A bank employee said "With zero interest, people are now depositing their savings for indefinite terms so they can withdraw the money at any time. It's inconvenient for the bank and affects liquidity and our ability to extend credit," she said.
Hoang Minh Phu, a depositor in Hanoi said he felt safer with US dollars. "I know I won't have any interest but I won't be affected by the government's policies."
Nguyen Tri Hieu, an independent director on the board of Ocean Bank, said US dollar hoarding showed people's concerns about world economy and local policies. Vietnam saw record low inflation of 0.63 percent in 2015. However, it is forecast that the rate may rise to 5 percent this year due to increases in electricity, education and healthcare prices.
"The Vietnam dong falling against the US dollar has worried the public, at least until the end of the second quarter. That's why many people are hoarding US dollars in case exchange rates are adjusted for the worse," he said.
Hieu went on to say that the concern was particularly true to who have savings of more than USD10,000.
