Vietnam & World Forex Market News

The dollar price surged to 18,340-18,360 dong per dollar last week. Businesses still find it difficult to purchase dollars even though the State Bank of Vietnam (SBV) claims the dollar shortage has lessened.

The dollar remains in short supply even though the central bank has stated that many banks have successfully purchased dollars from export companies and have seen their liquidity improve.

Alain Cany from EuroCham noted at a financial crisis workshop on October 15 that it takes businesses one week to arrange one million dollars and that they have to purchase the dollars from 7-10 different banks.

Ford Vietnam, an automobile manufacturer, also complained about the dollar shortage in the New York Times last week. Michael Pease, General Director of Ford Vietnam, revealed that he once had to consider between a non-dollar currency or failing to transfer money to suppliers’ accounts on schedule.

Though the SBV prohibits selling dollars at prices higher than the ceiling level, a lot of businesses must purchase dollars at higher levels. One banker spoke frankly and reported that the core problem in dollar purchasing is setting reasonable sale prices. Some foreign individuals and institutions have to transfer the profit they get from investments in Vietnam to their home countries and must purchase dollars at high prices because they have no other choice.

Le Xuan Nghia, Deputy Chairman of the National Finance Supervision Committee, said that the problem is not that Vietnam lacks dollars, but has bad liquidity.

According to Asian Development Bank (ADB), the foreign currency reserves of Vietnam have dropped from $23 billion in late November 2008 to $17.3 billion in late June 2009, enough for three months of imports. ADB has also warned about the decline of foreign direct investment (FDI) and decline of savings and investments from the private sector. Overseas remittances (kieu hoi) have been forecasted to decrease by two billion dollars in comparison with eight billion dollars in 2008.

Le Dat Chi from the HCM City Economics University quoted Standard & Poor’s as stating that Vietnam’s foreign debt is about 28.8 percent of its GDP. Concurrently, inflation in on the increase and the current balance deficit may reach 7-9 percent of the GDP (according to ADB and the International Monetary Fund - IMF).