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Gradual VND revaluation better than shocking jump

VietNamNet Bridge – VietNamNet briefs an article by Nguyen Dinh Bich, Senior Economist at the Trade Research Institute, about the VND/US$ exchange rate policy, published in Thoi bao Kinh te Vietnam. Bich thinks that a gradual VND revaluation is better than a shocking jump.





The government and state management agencies have not announced the official treatment for the VND/US$ exchange rate. However, it seems that those advocating the scenario of the dramatic VND revaluation have gained the upper hand.



The Vietnam Association of Financial Investors (VAFI) and other experts have proposed widening the forex trading band from 1% currently to 3-4% or even 5%, which means that the central bank needs to revaluate the VND in order to clear away the tie-up in the monetary market. Currently, banks are refusing to buy dollars from exporters, because they have to buy at high prices following the current forex policy applied by the State Bank of Vietnam.



However, the too wide trading bands may be the overdose to the national economy. The conclusion was released after considering the factors as follows.



First, this would put on the emergency brake on the export train. Figures released by the Ministry of Industry and Trade several days ago show that enterprises have been struggling to fulfill their export plans.



In order to export nearly $60bil worth of turnover this year, Vietnam has to gain the export turnover of $5bil every month. Meanwhile, exports fetched $13bil only in the first quarter.



This means that the ‘export train’ is slowing down; if the State Bank widens the forex trading band as suggested, i.e. the dollar’s value declines more sharply, exporters will go bankrupt.



Vice versa, the ‘import train’ is speeding up, pushing the trade deficit to a new record high.



Also according to the Ministry of Industry and Trade, in January, import turnover was $5bil only, while the figure jumped to $8.2bil in February and then $7.3bil in March, raising total import turnover to $20.5bil in the first three months of the year. This represents the increase of 68.7% over the same period of last year, and three times more than the export growth rate.



The overly wide trading band will be the main factor in preventing Vietnam from reaching its economic targets. As such, though the VND revaluation is unavoidable, the revaluation process needs to be carried out step by step so that the national economy has enough time to adapt to it.



If policy makers impatiently apply drastic policies by sharply devaluating the dollar, this will cause immeasurable socio-economic consequences.



Chairman of HSBC David Eldon also said on the sideline of the Asia Banker conference that no country can have a healthy market overnight with just quick actions.



(Source: TBKTVN)

[In trang]

Bài báo trên VietNamNet Bridge:
http://english.vietnamnet.vn/biz/2008/03/775209/
Xuất bản lúc: 07:33 26/03/2008

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http://english.vietnamnet.vn/biz/2008/03/775209/