Vietnam Increases Benchmark Lending Rate to 12% (Update1)
By Nguyen Kieu Giang
May 17 (Bloomberg) -- Vietnam will raise its benchmark interest rate to 12 percent from 8.75 percent, the Southeast Asian nation's central bank said.
The increase in the base rate will take effect May 19, the State Bank of Vietnam said today in a statement released before a news conference in Hanoi.
The discount rate will also rise, to 11 percent, while the refinance rate will increase to 13 percent, according to the statement.
Consumer prices in Vietnam surged 21.4 percent year-on-year in April, the most since at least 1992. The central bank has raised interest rates and reserve requirements at commercial banks to reduce the money supply and curb inflation, while the trade deficit almost quadrupled through the first four months, driven by a surge in imports.
The central bank said on April 25 it didn't plan to increase its benchmark interest rate because month-on-month inflation showed recent policy measures were effective
Bank lending rose 14.7 percent to the end of April from the first of the year, reaching almost half the 30 percent limit set by the central bank to reduce credit growth.
Standard & Poor's Ratings Service this month cut its outlook on Vietnam's credit rating to negative from stable, citing ``rising risks to macroeconomic stability from an overheating economy.''
The amount commercial banks must set aside as reserves was raised in February to 11 percent of deposits of 12 months or less, from 10 percent. For dong and foreign currencies deposited for one year or more, the figure rose to 5 percent from 4 percent.
Commercial banks agreed on April 29 to raise the rate they give dong currency depositors to 12 percent