The State Bank of Vietnam (SBV) has officially extended a policy allowing exporters to take loans in foreign currencies for another year instead of stopping it on December 31 as planned.

Circular 18/2017/TT-NHNN issued on the 27 December 2017, effective 1 January to 31 December, 2018, stipulates that commercial banks may provide short-term foreign currency loans to exporting firms that have foreign currency turnover and require funds for domestic production.

Upon receiving such loans, exporting firms shall immediately sell the amount of foreign currency borrowed to the lending institutions using the spot forex trading method, except in cases where the foreign currency will be used to make payments.

The policy was extended to help local exporters increase their competitiveness and exports. This is among the Government’s incentive policies targeted at supporting local enterprises until 2020, approved in Decree 35/NQ-CP, issued in May 2016.

The policy enables exporters to borrow foreign currencies at low interest rates, currently between 2.5-4 percent for short-term US dollar loans. The rate for short-term Dong loans range from 7-9 per cent. According to the State Bank, the policy will be discontinued in the long run and firms must gradually shift from borrowing to buying and selling foreign currencies.