Vietnam SBV may halt lowering lending rates to stabilize dong

Vietnam SBV may halt lowering lending rates to stabilize dong

Vietnam's State Bank of Vietnam (SBV) is considering halting its planned reduction in lending rates, a move aimed at stabilizing the Vietnamese dong amidst ongoing currency depreciation and economic challenges. The central bank had been expected to lower its benchmark rate from the current 4.50% to 4.00% in 2026 and 3.50% by 2027 [1]. However, recent developments suggest that the SBV may reassess this strategy to address the dong's depreciation and potential inflationary pressures.

The SBV's decision to maintain the key rate at 4.50% is a significant shift from its earlier plans. This move comes amidst growing concerns about the Vietnamese dong's depreciation against the U.S. dollar, which has put pressure on exporters and import-dependent industries. The SBV's flexible exchange rate management has been designed to balance these dynamics, but the recent depreciation has necessitated a reassessment of monetary policy.

The SBV's accommodative monetary policy, which has driven a 9.9% year-on-year credit growth in 2025, has also exposed vulnerabilities in the banking sector. The low-rate environment has enabled businesses and households to access credit at historically favorable terms, but it has also contributed to the dong's depreciation. The SBV's decision to pause rate cuts is an attempt to mitigate these risks and stabilize the currency.

The SBV's pause in rate cuts is not without precedent. In 2019, the central bank also paused its rate-cutting cycle to address currency depreciation and inflationary pressures. This move allowed the SBV to reassess its monetary policy and adjust its strategy to better align with the evolving economic landscape.

The SBV's decision to maintain the key rate at 4.50% is a sign of its commitment to economic stability and growth. While the pause in rate cuts may slow down credit growth in the short term, it is a necessary step to address the dong's depreciation and potential inflationary pressures. The SBV's ability to balance these competing priorities will be critical in shaping Vietnam's economic trajectory in the coming years.

References:
[1] https://www.ainvest.com/news/vietnam-central-bank-policy-unlocking-banking-sector-opportunities-rate-era-2508/
[2] https://www.tradingview.com/news/reuters.com,2025:newsml_L4N3TY0EB:0-vietnam-raises-166-9-mln-in-government-bond-auction/