WB: Vietnam Should Choose More Foreign Currencies

Chief Economist of the World Bank in Vietnam Martin Rama has recently suggested that the government of Vietnam should choose the entire foreign currencies basket to sharpen the competitive edge of its exports instead of the single U.S. dollars currently, the Labor newspaper said.

 

So far Vietnam has established the trade relationship with more than 200 foreign countries and its trade has seen a robust growth pace after WTO accession. The U.S. bought US$10 billion worth of Vietnamese goods, ranking the first last year, followed by the European Union with US$9 billion, Japan with US$6 billion, China with US$3 billion and Singapore with US$2 billion, the newspaper said.

 

Vietnam reported trade surplus with the EU and the U.S., but the trade deficit with China reaching US$9 billion, or 31 per cent of the country’s trade deficit of US$29 billion last year.

 

Vietnamese exporters preferred payments by U.S. dollar to 13 other foreign currencies because of its stable cross rates. Up to 80 per cent of Vietnam’s export contracts were traded in U.S. dollar, followed by Euro with 1.8 per cent.

 

As a result, the dollarizaton of Vietnam’s economy, which is gauged by a total of foreign currencies deposits over a total payment balance, reached 24 per cent in 2004, lower than 30 per cent by the International Monetary Fund.

 

Currently, the total outstanding U.S. dollar loans accounted for 24 per cent of Vietnam’s banking system’s total.

 

The dollarization is blamed for weaknesses of the emerging economies with high inflation rates, the newspaper said. (Labor)