Overseas remittances to Vietnam, a major source of foreign currency, will reach $7.3 billion this year, rising 14 percent from last year’s $6.4 billion, central bank governor Nguyen Van Giau said on Thursday as he tried to cool concern of a squeeze on dollar liquidity.
Giau told reporters the supply of foreign exchange in the domestic market could also benefit significantly if a proposal he made to the trade minister to consider using locally-refined oil products instead of imports gets adopted.
“If it works out, the foreign exchange supply will be supplemented substantially next week,” he said.
The dong currency has weakened against the dollar and on Thursday was trading at VND21,370/VND21,450, according to an information service provided by a state-run telecoms company — nearly 9 percent lower than officially permitted by its banded peg.
Economists say several factors are behind the dong’s slide, including high inflation, trade and budget deficits and soaring gold prices.
A year-end increase in demand for dollars, in part due to seasonal factors but also partially the result of a spate of dollar-denominated loans coming due, was also a factor.
Vietnamese authorities pledged in early November not to adjust the official exchange rate before Tet, or the Lunar New Year festival, which falls in early February 2011.
The State Bank of Vietnam raised policy rates by 100 basis points shortly after that announcement and has been selectively providing dollars into the system.
Vietnam’s only operational refinery, the 140,000-barrel-per-day Dung Quat plant on the central coast, is estimated to be able to meet about 30 percent of the country’s petrol demand — meaning foreign currencies have to be found to buy oil from external sources.
In September, traders said top petrol distributor Petrolimex would not import products for fourth quarter arrival and would rely more on locally-produced goods.
Economists have noted Vietnam’s weak foreign exchange reserves position prevents the central bank from meaningful intervention to support the dong.
On Thursday, International Monetary Fund data showed that total reserves minus gold grew to $14.11 billion by the end of September from $13.73 in August. Later figures were not available and the government guards the latest numbers as a state secret.
That figure represented a broader definition of reserves than is often used.
In September, the IMF said it expected reserves, including gold, as calculated by the Vietnamese authorities to reach $15.4 billion by the end of this year and $19.2 billion next year.
Source: Tuổi Trả Online