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Vietnam says ‘no’ to dong devaluation
Market supply and demand will decide foreign exchange rates, Prime Minister Nguyen Tan Dung said on Wednesday but ruled out the possibility of devaluing the Vietnamese dong.
Asked whether Vietnam was considering a dong depreciation just as other countries had devalued their currencies to prop up their economies, Dung said any forex policy would impact on monetary and financial markets.
The Government is still adjusting forex rates as required by the market as evidenced by a recent move to widen the dong trading band to 3% on either side to support the export sector, he told reporters in Hanoi after a monthly Cabinet meeting.
Foreign currency supply and demand have been balanced, so there is no need for the Government to allow the dong to fall against the U.S. dollar, he said, citing ample dollar supply at commercial banks.
He noted the Government had issued US$1 billion worth of bonds to absorb foreign currency from the banking system.
Any devaluation of the dong, he cautioned, will impact on the country’s foreign debt. “If devalued, the dong could trade, for instance, at VND18,000 per dollar compared to the current VND17,000. And the nation’s US$18 billion foreign debt will leap considerably in local currency terms.”
This will seriously affect the State budget, he stressed.
The country experienced a host of woes last year and the situation will continue to be seen this year, he said, quoting forecasts that the world economy would grow a mere 0.5%, the lowest level in 60 years, though the International Monetary Fund predicted world growth of 2.2% two months ago.
Vietnam’s budget revenue has shrunk substantially since one-fourth of gross domestic product (GDP) is sourced from crude oil export revenue, he said.
World oil prices have plunged to around US$40 per barrel compared to last year’s average of US$104, but the State budget revenue target approved by the National Assembly is based on the US$70 per barrel hypothesis, he said.
Therefore, he noted, the country should maintain GDP growth at about 6% to stabilize business and production.
Monetary policy measures will play a vital role in making all these a reality, he said. “Through the loan interest support equivalent to four percentage points, enterprises can take out bank loans totaling VND420 trillion to add to their working capital.”
Nguyen Xuan Phuc, minister-chairman of the Government Office, said at the Cabinet meeting that the Government would implement three key programs this year to attract foreign investment, ensure food security and develop big economic groups.
VietNamNet, SGT
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