Vietnam Currency Discussion Board

[RICK C]

Business

IMF gives Vietnam a 5-step plan

VNECONOMY updated: 11/12/2007


At this year’s Consultative Group meeting, the International Monetary Fund (IMF) recommended five ways Vietnam could continue improving its economy; it emphasized sustainable development based on control of the monetary market.

The first thing the IMF recommended is tightening monetary policies. In the January – September period, the volume of cash in circulation was high and the IMF told Vietnam to strictly manage joint stock and commercial banks’ operations.

The IMF encouraged the Government to enforce credit growth and tighten conditions on money and banking supervision, especially on joint stock banks.

The IMF also asked the State Bank of Vietnam to strengthen its monetary administration flexibility and clearly define its market administration goals and methods.

The fund also recommended increasing exchange rate flexibility. Accordingly, as the capital flow into Vietnam increases, it is necessary to timely intervene in the exchange rate and to not pressure monetary administration.

Another issue that the IMF mentioned is a cautious fiscal policy. Vietnam is in high demand from both domestic and international investors, but pursuing an expansive fiscal policy can make inflation more serious or hamper sustainable growth.

The IMF also encouraged the Vietnamese Government to more carefully supervise outside capital sources; and especially not fund State-owned enterprises’ projects through issuing government bonds.

The fourth point is speeding up banking reforms. IMF said it highly appreciates the comprehensive banking reform itinerary of Vietnam, particularly the equitisation of State-owned commercial banks. It stressed the importance of turning the State Bank of Vietnam into a modern central bank, able to manage monetary policies and supervise other banks and financial institutions during this period of strong growth.

The fund also suggested the expansion of the private sector’s role, considering this the catalyst for economic growth and job creation. IMF said that all State-owned enterprises should be completely equitised by 2010.

Source: Thời báo Kinh tế Việt Nam