Government moves to top up foreign reserves
Government moves to top up foreign reserves
Viet Nam's government has added sources formulating the State foreign reserves, which is viewed as a good move to enrich the reserves and strengthen the resilience of the economy.
In the newly issued Decree No 50/2014/ND-CP on Tuesday by the government, additional sources are reserves that are bought by interests derived from the existing reserves investment, and those bought by interests of foreign deposits of the State Treasury and credit institutions.
The new regulation takes effect on July15, 2014.
The other sources that formulate the state reserves remain unchanged. In the Decree No 86/1999/ND-CP of August 30, 1999, which is under effect at the moment, the State foreign exchange reserves are formulated from the following sources: the existing foreign exchange under the state ownership and the management by the State Bank; foreign exchange bought from the state budget and from the domestic foreign currency and gold markets; foreign exchange from loans of foreign banks and international financial organisations; and foreign exchange from other sources.
The State Bank of Viet Nam reported to have received US$10 billion in the first four months of 2014, raising the total foreign reserves to $35 billion. The central bank's Governor Nguyen Van Binh also announced in the government's April meeting that if taking into account the potential, the reserves probably amounted to $45 billion. Larger reserves are believed to help stabilise foreign exchange rates.
In the new decree, the State foreign exchange reserves for the first time include special drawing rights at the International Monetary Fund. Other components are almost similar but more specific. The reserves include foreign currencies in cash, foreign currency on overseas deposit accounts; securities and other valuable papers in foreign currencies issued by the government, foreign institutions; gold managed by the State Bank of Viet Nam; and other sources of reserves of the state.
Currently, the state foreign exchange reserves contain foreign currencies in cash; foreign currency credit balance on overseas deposit accounts; bills and acknowledgments of foreign debts in foreign currencies; debt securities issued or guaranteed by the government. It also contains foreign banks, international monetary organisations or banks; and international standard gold and other kinds of foreign exchanges.
Under the new decree, every six months or as and when required, the State Bank's governor will review and decide structure, standards and cap for the State foreign reserves investment and then report to the Prime Minister.
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