The increasing inflow of remittances ahead of the Lunar New Year has replenished the liquidity of the banking system, thus resulting in a steep fall in the interbank interest rates in January, according to insiders.

Illustrative image (Photo: VNA) 

Experts from Bao Viet Securities Joint Stock Company (BVSC) said the State Bank of Vietnam (SBV)’s net purchase of foreign currencies was around 6 billion USD in the last two months of 2019, increasing the nation’s foreign exchange reserves to approximately 79 billion USD.

They held that a plentiful supply of money has driven interest rates down ahead of the biggest annual holiday.

Statistics show that during January 6-10, the interbank interest rates sharply declined on all terms. The overnight rate was 0.94 percent per annum, and one-week rate was 1.46 percent per annum, a fall of 3.06 percent and 2.74 percent, respectively, as compared to those recorded during December 2-6.

Analysts from the MB Securities Company (MBS) forecast liquidity of the banking system will be positive in 2020 as more foreign direct investment will run into the country that has favourable investment policies and attractive labour costs as well as various benefits from the US – China trade war.

“We believe that liquidity of the banking system will be plentiful in 2020; therefore, the interest rates will not be affected by external factors”, an insider said.

According to BVSC’s latest report, interest rates will be stable in 2020; however, they are hard to fall further in the next few months since the inflation rate is said to shoot up in the first half of 2020, driven by soaring pork and fuel prices.