hueseo
Joined: 06 Jul 2011
Posts: 423
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 Posted: Thu Sep 01, 2011 12:39 pm Post subject: Domestic gold savings to be tapped |
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The State Bank of Vietnam (SBV) is mulling over a plan to attract and utilise gold accumulated in domestic savings in order to bolster national foreign currency reserve.
Vietnamese are currently hoarding 300-500 tonnes of gold
Truong Van Phuoc, former Director of the SBV’s Department of Foreign Currency, said that banks had previously accessed 130 tonnes of the precious metal that is often accumulated by Vietnamese as a form of saving. The SBV estimates that between 300 and 500 tonnes of gold may be held in domestic savings. From May 1 this year, the SBV requested an end to gold lending and the gradual reduction in gold savings by May 1, 2013, he shared.
In order to take advantage of this untapped source of capital, the SBV is considering allowing banks to spur gold buying in the time to come. However, banks would neither be allowed to provide lending in gold nor convert it into VND, but instead deposit it at the state bank.
In order to do that, commercial banks may be allowed to issue bonds and bills in gold in a bid to increase gold deposits. The SBV will borrow against the gold reserves from commercial banks via the issuances of treasury bills.
The SBV may exchange half of the gold saved to buy in order to boost the national foreign currency reserve.
With domestic gold prices much higher than global prices, the SBV may sell their remaining gold to boost domestic supply. This is expected to help cool the domestic market and save dollars that should be used for gold imports, he explained.
Those who buy bonds in gold may be allowed to take back their gold before the terms. They may be also allowed to mortgage and redeem their bonds for gold.
Raising foreign currency reserves
Associate Prof. Dr. Tran Hoang Ngan, a member of the National Monetary Policy Consultancy Council, said several countries had raised gold savings and exchanged it for foreign currency.
According to Ngan, Vietnam’s foreign debts are estimated at around USD44 billion, including USD32.5 billion worth of debts guaranteed by the Government. The country could spur its national foreign currency reserves by attracting gold savings and exchanging it for USD.
“If the country absorbs 300-500 tonnes of gold, it would exchange for an equivalent USD18-30 billion. The figure is nearly equal to the debts guaranteed by the Government. Higher foreign currency reserves could heighten the country’s economy and increase investors’ confidence,” he noted.
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