Foreign currency reserve of Vietnam estimated at $16 billion

After SBV increased the basic rates of the dong and adjusted forex rate, specialists of Standard Chartered Bank on November 26 reported that SBV re-allowed the dong to continue depreciating against US dollar.

The adjustment helps stabilise people’s belief in the value of dong in future by easing the worries on the depreciation of dong. Accordingly, investors prefer reserving the dong to US dollar, which will cause the pressure on liquidity of domestic US dollar reserve.

Tai Hui, head of Asia region research division of Standard Chartered cited the figures from SBV and assessed that Vietnam’s foreign currency reserve in October was equal to the 12-week import value. According to calculation of Standard Chartered, the figure is about $16 billion, falling from June (2009)’s $20.3 billion as reported by International Monetary Fund (IMF).

The fall came from a reduction in inward remittance and FDI that is predicted to decline by 20 percent to $5.8 billion in 2009, the expert explained. Meanwhile, market regulators are seeking US dollar loans from World Bank, other economies of Asia and Asian Development Bank (ADB) in order to increase the reserve source. At present, Vietnam borrowed $500 million from ADB and has pursued another loan of $1 billion from World Bank.

While the foreign currency market is still controlled closely, we [Standard Chartered] believe that the increasing of FDI and overseas remittance in 2010 will help ease the pressure of international payment of Vietnam, Tai Hui said.

Concerning trade deficit, the expert gave his point of view that the sustainable prices of goods will curb the rising trade deficit of Vietnam. Compared with the first half of 2008 when the average trade gap was recorded at $2.4 billion a month and reached $3.3 billion in March. So the current trade deficit has not been alarming.

According to the foreign bank, prices of most commodities will not increase highly like 2008, including oil and steel prices. This will limit the import of refined oil and steel in the last half of 2009.

The initial operation of Dung Quat oil refinery will contribute to curbing the trade deficit based on rising demand for energy. In history, Vietnam was the country of exporting crude oil and importing refined oil.

Tags: Vietnam finance news