US, VN reach deal on valuations of the dong
Viet Nam has pledged not to manipulate its exchange rate in order to gain an unfair competitive advantage and will refrain from any competitive devaluation of the Vietnamese dong, the State Bank of Viet Nam has said in a joint statement with the US Treasury.
The US raised its concerns about Viet Nam’s currency practices in a virtual meeting on Monday between US Secretary of the Treasury Janet Yellen and the State Bank of Viet Nam (SBV) Governor Nguyen Thi Hong.
In the meeting, the US and Viet Nam agreed that the two sides were trusted partners with a friendship grounded in mutual respect that could effectively work together for the benefit of both sides.
“In keeping with this strong partnership, the Treasury and SBV share the goals of maintaining the strength, stability, development, and resilience of each country’s economy and financial system,” the statement published on the Treasury’s website said.
The Treasury and the SBV have had extensive discussions in recent months and have reached an agreement to address the Treasury's concerns about Viet Nam’s currency practices. This is described in the Treasury’s Report to Congress on the Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the US.
The SBV stressed that the focus of its monetary policy framework was to promote macroeconomic stability and control inflation.
“Viet Nam confirms that it is bound under the Articles of Agreement of the IMF to avoid manipulating its exchange rate in order to prevent effective balance of payments adjustments or to gain an unfair competitive advantage and will refrain from any competitive devaluation of the Vietnamese dong,” it said.
The SBV was also making ongoing efforts to further modernize and make its monetary policy and exchange rate framework more transparent, said the SBV. It added that the SBV will continue to improve exchange rate flexibility over time, allowing the Vietnamese dong to move in line with developments in financial and foreign exchange markets and in line with the fundamentals of economics while maintaining macroeconomic and financial market stability.
The SBV will continue to provide necessary information for the Treasury to conduct a thorough analysis and reporting on the SBV’s activities in the foreign exchange market for the Treasury’s semiannual Report to Congress on the Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the US.
The Treasury will inform other US government agencies that it had reached an agreement with the SBV to address US concerns about Viet Nam’s currency practices.
“The State Bank of Viet Nam will continue to manage exchange rate policy within its general monetary policy framework to safeguard the proper functioning of the monetary and foreign exchange markets, to promote macroeconomic stability and to control inflation, not to create an unfair competitive advantage in international trade,” Hong said.
“I believe the State Bank of Viet Nam’s attention to these issues over time will not only address the Treasury's concerns but will also support the further development of Viet Nam’s financial markets and enhance its macroeconomic and financial resilience,” said Secretary Yellen in the statement.
The two sides also committed to maintaining close co-operation between Treasury and the SBV and said they look forward to addressing other shared challenges, such as supporting a strong and inclusive recovery from the COVID-19 pandemic.
Viet Nam had been under pressure from the US over its currency practices after the Trump administration, in December last year declared Viet Nam a currency manipulator.
The Treasury under Yellen in April removed the label of currency manipulator for Viet Nam.
The US was the largest export market of Viet Nam last year with a value of about US$77 billion, increasing by more than 25 per cent over 2019 and bringing the trade surplus Viet Nam ran with the US to nearly $64 billion, according to customs.