Thursday, August 17, 2017 - 2:43:12

Experts warn of mixed impact of VND devaluation

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International experts have hailed Vietnam ’s decision to devalue the VND against the USD by 9.3 percent at inter-bank transactions but also warned of possible escalation in inflation if no firm steps are taken.

Benedict Bingham, Resident Representative of the International Monetary Fund (IMF) in Vietnam , saw the devaluation as an active step taken by the State Bank of Vietnam (SBV) to gradually narrow the difference between official and unofficial exchange rates.

The decision would make the mechanism in handling the forex rates more flexible, said the IMF country chief.

The Vietnamese Government recently managed to solve burning macro economic issues through policy revision, he remarked, adding that the forex adjustment made on February 11 was an example.

Dr Matthias Duhn, Executive Manager of EuroCham Vietnam , described the recent forex decision as a correct action, which is expected to convince business circles of national macro economy stability in 2011.

International analysts, however, warned of possible escalation in inflation and pressure on Vietnam ’s debt credibility prospects after the devaluation of the Vietnamese dong.

The IMF Vietnam chief advised the Government to work out a comprehensive fiscal solution to macro economic issues, regarding public debt, the health of State-owned enterprises and inflation, which may cause indirect or direct impact to the national currency.

In response to these worries, the Chairman of the National Financial Supervision Committee, Le Duc Thuy, said the recent forex adjustment would not escalate inflation as the rate has been calculated on the basis of business elements.

Although admitting the double edged nature of the move, the former State Bank of Vietnam Governor said a reasonable forex rate “will help economic sectors forecast their own trends of business and make correct decisions for investments, thus contributing to stablising the macro economy”./.
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