New central bank governor faces a series of challenges: interest rates, exchange rates, and gold market pressure

The global economy is facing numerous uncertainties, with geopolitical tensions showing no sign of abating. That is increasing pressure on monetary policy management for the banking sector and on the new State Bank of Vietnam (SBV) Governor Pham Duc An.

In a context where the economy is entering a new development phase with a target of double-digit growth anchored by macroeconomic stability, leaders are expected to align policy with sustainable growth drivers.

Monetary policy management amid global volatility

Amid ongoing global economic volatility and prolonged geopolitical tensions, monetary policy management is becoming increasingly difficult for the banking sector and for SBV Governor Pham Duc An in particular. The SBV is expected to manage monetary policy and the exchange rate flexibly—ensuring macro stability, controlling inflation, and supporting faster and more sustainable growth.

Prof. Dr. Tran Hoang Ngan, a National Assembly deputy and Chairman of the Advisory Council for Breakthrough Development at Saigon University, said Vietnam has maintained macro stability and kept inflation under control for a decade despite volatile conditions.

He noted that Vietnam’s multi-target monetary policy requires balancing economic growth, inflation control, macro stability, and monetary security and banking system safety. He also pointed to the need for flexible policy actions and tighter management of bad loans.

Imported inflation and implications for credit

Ngan said that since the global energy crisis triggered by conflicts in the Middle East, world oil prices have risen, lifting price levels in most countries. He said interest rates have shown localized increases domestically.

He also recalled that immediately after taking office, SBV Governor Pham Duc An directed the banking system to reduce lending rates, supported by improved liquidity in the banking system.

Ngan emphasized that when inflation rises, the first cited reason is often an increase in money supply, but the cause depends on the context. “Currently, commodity prices rise not only due to money supply but primarily due to cost-push factors, such as high global oil prices. This is what is often called ‘imported inflation,’ not inflation driven by money supply,” he said.

He cited that in earlier years, credit growth ran around 14–16% while inflation remained below 4%. Today, he said, rising global oil prices increase logistics costs and can create a domino effect on the price level, potentially leading to temporary liquidity shortages in the banking system. That, in turn, can force banks to raise deposit rates.

Ngan said the SBV should support liquidity to the market and direct capital toward production and business while limiting flows into high-risk areas. “We need to control credit growth at banks showing liquidity weakness,” he warned.

Growth priorities and credit allocation

Ngan said the banking sector should pursue policies consistent with the spirit of the XIV Congress Resolution, promoting growth while upholding principles highlighted by the General Secretary.

He argued that genuine growth should be based on productivity gains and technology upgrades. SBV’s credit policy, he said, should prioritize capital for science and technology, innovation, and productivity-driven growth—anchored in macro stability and inflation control. He added that mobilizing resources from state, private, and foreign-invested sectors is essential, and that growth should improve living standards.

Reducing lending rates and lowering the cost of capital

Economist Prof. Dr. Din Trong Thinh said the urgent issue is to reduce lending rates. He cited that deposit rates are typically around 8–9% per year, while loan rates are around 12–13% per year, leaving many enterprises under pressure.

“Lowering bank lending rates must be a top priority. The SBV should issue stronger directives to reduce the cost of capital,” Thinh said. He added that to lower rates, the SBV can use various tools as long as the objective is achieved, including measures to increase money supply.

Exchange rate and gold market stabilization

Thinh said stabilizing the domestic gold market and narrowing the gap between domestic and international gold prices is another significant challenge for the new Governor. “We need to stabilize the domestic gold market and reduce the domestic-international price divergence to ensure stable trading and avoid risks from paper-based gold purchases,” he said.

He also highlighted exchange rate management as a major ongoing challenge. Thinh argued that the exchange rate largely depends on the health of domestic production and business activity. When production is strong, managing the exchange rate is easier; otherwise, it becomes more difficult.

“The key is that foreign exchange operations must be kept within defined limits to provide room for credit and exchange rate stability. This will in turn stabilize bank credit and lead to favorable exchange rate movements. The core objective for the banking sector remains inflation control and growth support. The task is to maintain exchange rate stability to keep the economy functioning smoothly,” he emphasized.

Coordination on digital asset market management

Thinh said a major upcoming task for the banking sector is to coordinate with the Ministry of Finance and other agencies to unify management of the digital asset market.

“Private digital assets should be brought within a regulatory framework, with enhanced monitoring to ensure healthy digital asset trading and currency issuance in Vietnam,” he said.