Illustrative image (Source: baodautu.vn) Nishad Majumdar, a sovereign analyst in Singapore, held that therecent appreciation of VND, which reflects the improved external position, willgive the central bank space to rebuild the forex buffers that were spent downduring the USD’s rally last year.
Vietnam’s reserves stood at 88.3 billion USD in January,according to the International Monetary Fund.
Majumdar held that the recovery in tourism and steadyforeign direct investment inflows will help boost the nation’s reserves even asexports weaken.
The VND has advanced 6% in the past six months, joining arally in Asian peers, as the USD has weakened.
He recommended that Vietnam prioritise exchange ratestability as a means to stabilise inflation and create certainty for inboundinvestors.
A stronger VND reduces the local-currency value of thegovernment’s external debt, which still accounts for about a third of overallgovernment borrowing, he said.
It will also likely mitigate the impact of higher import andmanufacturing input costs into domestic inflation, giving the authoritiesfurther space to pursue a more accommodative monetary policy, the expert added./.
VNA
