Public savings saw a strong shift to the dollar last year, as dollar deposits grew a staggering 34.5% in 2008 compared to a much milder growth rate of only 8.9% in Viet Nam dong, the central bank’s HCMC branch said.

Ho Huu Hanh, director of the central bank’s HCMC branch, said in a conference reviewing banking operations in the city last week that due to volatility on the money market in 2008, the shift to the greenback turned stronger during some months of last year. However, he said, the situation in the last two months of the year became more balanced as depositors were more confident in the local currency.

According to the HCMC Branch’s report, credit institutions in HCMC last year mobilized an estimated VND561.5 trillion in both Vietnam dong and the dollar, increasing 15.3% from the previous year. This proved a marked slowdown as the mobilization growth was 70.6% in 2007, 51.2% in 2006, and 25.6% in 2005.

Lending in the US dollar was also stronger last year, posting a growth of 24.5% compared to 19% in the growth rate of Vietnam dong loans. Overall, banks in the city made total outstanding loans of VND490 trillion last year, up 20.6% from 2007.

Hanh attributed the strong growth in dollar loans last year to stronger import, softer interest rate for dollar loans, and greater activity of foreign banks in the country. In the first 11 months last year, loans in the U.S. dollar at foreign banks increased 52.9% from the previous year.

Total loans in foreign currencies made by foreign lenders in the city last year amounted to VND74.3 trillion, accounting for 52.7% of the total outstanding loans in foreign currencies made by all credit institutions in HCMC.

In the conference last week, the central bank’s deputy governor Nguyen Van Binh showed concern about the economy being ‘dollarized’ as the closing gap between interest rates of Vietnam dong and the U.S. dollar had encouraged the people and enterprises to keep the dollar.

The deputy general director of a joint-stock bank said that his customers now refused to receive remittances in Vietnam dong, but insisted on taking the U.S. dollar because the buying price of the bank was lower than on the black market.

The selling price of the U.S. dollar in the unofficial market last week even hit VND17,800 the while buying price was around VND17,530-17,580.

Some banks such as Techcombank and Eximbank have quoted buying and selling prices in the U.S. dollar equally, at VND17,496 to the dollar last Friday, or 3% higher than the inter-bank rate. (SGT)