The Central Bank of Vietnam announced to quit usage of foreign currency like dollars in domestic transactions, in order to promote dong, the currency of Vietnam. The people of the country were ordered to sell out their foreign currency to the banks in the country.

The Central Bank told other banks to increase the rate of interest to 7% on the foreign currency for a year as this will help increasing banks cost of accepting dollars deposits and should levy low interest rates on dollars held by people as a source to discourage their holding capacity.

As per Hanoi-based bank officials, they were working as per the guidelines of central bank so as to increase the value of local currency dong, leading to establishment of Vietnam’s foreign-exchange reserves. The government was strictly focusing to promote dong because of a fall by 15% in the value of dong in opposition to the US dollars.

As per Nguyen Hai Ha, an analyst with MBCapital, which is one of the largest fund management organisations in Vietnam, these steps will help Central Bank meet the short –term aims on the exchange and reserve rates. The country had witnessed a deficit of $6.59 billion during the period from January up to May, which was worse than previous year deficits amounting to $5.46 billion