Confidence in dong should be restored: IMF official
Wed, November 17, 2010,10:30 AM (GMT+0700)
VND
The government needs to do more to restore public confidence in the dong since the key reason for its depreciation is that people do not want to keep it any more, the chief representative of the International Monetary Fund in Vietnam said.
Benedict Bingham, Senior Resident Representative of the IMF, told an online forum on factors hindering Vietnam’s economic growth organized by newswire Vietnamnet that there were two reasons for the dong’s depreciation.
In the second half of this year, policies seemed to diverge from the earlier goal of stabilizing the economy and were focusing on growth.
Under the circumstances, people feared high inflation could return and were worried about their dong holdings. But they were wise and flexible enough to quickly move into gold and the dollar when they saw inflation rising and interest rates falling.
Another problem, which was high on the agenda at the ongoing National Assembly session, was the public debt.
People could see the high public debts and the problems at big state-owned companies and feared the debts would have a negative impact on their dong savings.
“I believe the government needs to make more effort to restore confidence among dong depositors and send a message to voters that the government will make every effort to reduce the public debts.”
The dong was depreciating though 6.5 percent growth was attainable this year, exports were recovering, and foreign direct investment was flowing in.
This was a topic of public interest since things were going in a diametrically opposite direction in other regional countries.
With capital flowing strongly into dynamic countries with high growth rates in East Asia, some governments have had to apply measures to restrain it to ease the upward pressure on their currencies.
But Vietnam, one of the most dynamic economies in the region, was left out due to the dong instability.
Clearly the dollar is not rising against the dong due to a shortage any more since foreign direct investment and portfolio investment and overseas remittances more than made up the trade deficit, which is estimated to be around US$12-12.5 billion this year.
Also joining the forum were the World Bank Vietnam Country Director Victoria Kwakwa and the head of the Vietnam Economics Institute, Tran Dinh Thien.
They agreed inflation, the volatility in gold and foreign currency rates, high interest rates, state-owned firms’ weaknesses, overspending, the high level of public debt, poor infrastructure, and low quality of labor force will all be latent sources of economic uncertainty in 2011.
Wed, November 17, 2010,10:30 AM (GMT+0700)
VND
The government needs to do more to restore public confidence in the dong since the key reason for its depreciation is that people do not want to keep it any more, the chief representative of the International Monetary Fund in Vietnam said.
Benedict Bingham, Senior Resident Representative of the IMF, told an online forum on factors hindering Vietnam’s economic growth organized by newswire Vietnamnet that there were two reasons for the dong’s depreciation.
In the second half of this year, policies seemed to diverge from the earlier goal of stabilizing the economy and were focusing on growth.
Under the circumstances, people feared high inflation could return and were worried about their dong holdings. But they were wise and flexible enough to quickly move into gold and the dollar when they saw inflation rising and interest rates falling.
Another problem, which was high on the agenda at the ongoing National Assembly session, was the public debt.
People could see the high public debts and the problems at big state-owned companies and feared the debts would have a negative impact on their dong savings.
“I believe the government needs to make more effort to restore confidence among dong depositors and send a message to voters that the government will make every effort to reduce the public debts.”
The dong was depreciating though 6.5 percent growth was attainable this year, exports were recovering, and foreign direct investment was flowing in.
This was a topic of public interest since things were going in a diametrically opposite direction in other regional countries.
With capital flowing strongly into dynamic countries with high growth rates in East Asia, some governments have had to apply measures to restrain it to ease the upward pressure on their currencies.
But Vietnam, one of the most dynamic economies in the region, was left out due to the dong instability.
Clearly the dollar is not rising against the dong due to a shortage any more since foreign direct investment and portfolio investment and overseas remittances more than made up the trade deficit, which is estimated to be around US$12-12.5 billion this year.
Also joining the forum were the World Bank Vietnam Country Director Victoria Kwakwa and the head of the Vietnam Economics Institute, Tran Dinh Thien.
They agreed inflation, the volatility in gold and foreign currency rates, high interest rates, state-owned firms’ weaknesses, overspending, the high level of public debt, poor infrastructure, and low quality of labor force will all be latent sources of economic uncertainty in 2011.