The State Bank of Viet Nam (SBV) has issued a circular to allow credit institutions and foreign bank branches to extend loans in foreign currencies to some borrowers in 2019, rather than cutting them off at the end of last year as planned.

Under the new circular, lenders will be permitted to provide short-term foreign currency loans to exporters who need the capital to import input materials. Borrowers will be required to have sufficient foreign currency revenue from exports to repay the loans.

The short-term loans are also available to those who need foreign currencies to pay for imported goods and services to serve domestic consumption, with the deadline pushed back to March 31, 2019.

Lenders are also allowed to consider the provision of medium- and long-term foreign currency loans for the payment of imported goods and services until September 30, 2019.

According to the SBV, the extension is designed to assist local exporters and producers by reducing borrowing costs, thereby enhancing their competitiveness in international trade, especially in the context of rising global trade protectionism.

Exporters prefer to take out loans in dollars as the interest rate for dollar loans is lower than for those in Vietnamese dong. Banks currently list interest rates at 2.8-4.7 per cent per year for short-term dollar loans and 4.5-6.0 per cent for medium- and long-term dollar loans. Meanwhile, interest rates are 6-9 per cent per year for short-term dong loans, and 9-11 per cent for medium- and long-term dong loans. — VNS