Macroeconomics Report - Public investment disbursements and treasury deposits at commercial banks
There is an ongoing story of Vietnam State Treasury’s deposits at commercial banks. While slow public investment disbursement created a massive amount of free money, the government’s new policies significantly opened the door for gearing up the amount of Vietnam State Treasury’s deposits at commercial banks in 2017.
16 commercial banks’ financial statements showed that total amount due to the government and SBV surged and reached over VND 273 Tn, equivalent to USD 12 Bn, in 2017 before slowing to VND 253 Tn at the end of Q1 2018. Notably, there was a similar scenario from 2008 to 2009 as VST’s deposits doubled and reached VND 130 Tn.
Although we agree that such deposits will affect negatively monetary policy by reducing money supply and could shock financial markets. Such deposits supported Vietcombank to smoothly solve the USD 5 bn amount caused by the state divestment in Sabeco in Dec 2017. Besides, we question whether such short-term deposits flows into speculative markets like the stock market are sound and sustainable. Furthermore, the bond market is also affected as the ratio of repos trading value and the total trading value climbed up, resulting in a downtrend for Vietnam’s government bond yields.
In 2018, we think VST’s deposits will still find their way into financial markets but could possibly only benefit the big lenders
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