HANOI – Vietnam’s central bank unexpectedly cut its discount rate to 3.5 per cent from 4.5 per cent in an attempt to boost economic growth amid global uncertainties.

The State Bank of Vietnam also reduced the overnight lending rate in the interbank market by 100 basis points to 6 per cent and lowered the cap on the lending interest rates for short-term loans in some sectors to 5 per cent from 5.5 per cent, it said in a statement on its website. The regulator kept the refinancing rate unchanged at 6 per cent.

The new rates would take effect from Wednesday, it said in the statement.

The central bank, which raised rates twice in 2022, said that while inflation is under control, the nation’s economy faces many difficulties. 

Nonetheless, the World Bank said Vietnam faces a risk of quickening inflation and the economy may slow to 6.3 per cent in 2023 from 8 per cent in 2022, according to a statement at a Hanoi briefing this week.

The rate cuts follow Prime Minister Pham Minh Chinh’s order to the central bank to take steps to lower lending interest rates to support businesses amid an uncertain global economic outlook. 

The central bank targets credit growth in 2023 at about 14 per cent to 15 per cent, with possible adjustments depending on the market situation, it said in January.

Vietnam has formed a steering committee on the restructuring of financial institutions led by the Prime Minister, according to a statement on Tuesday on the government’s website.

BLOOMBERG