Foreign exchange reserve "rice bank"

In 2012, Vietnam's foreign exchange reserves increased sharply again. This value is not only limited to monetary policy, but also has a national significance.

It is said that some people in the banking industry occasionally recall an "anecdote" from many years ago: at a meeting, a department-level leader expressed his opinion that in Vietnam's history, there had never been a single foreign currency in the state's foreign exchange reserves and there was no need to have one.

According to statements or sayings of some state leaders, the size of foreign exchange reserves is now enough to meet nearly 12 weeks of imports of the economy.

Receiving this information, many people attending the meeting, including representatives of some international organizations, were surprised. Because a country without foreign exchange reserves, or with very weak reserves, will face many risks...

For example, in 2008, in the general global context, the Vietnamese economy faced the impact of the crisis, foreign investors were concerned and foreign capital pressure reversed. In that context, for the first and only time to date, the state foreign exchange reserve figure was published in detail.

Late in the afternoon of June 19, 2008, under the direction of the Prime Minister, then Minister of Finance Vu Van Ninh chaired an online television forum, together with the State Bank, the Ministry of Planning and Investment, the Ministry of Industry and Trade (as it was then known) and international organizations such as the World Bank (WB), the Asian Development Bank (ADB), the International Monetary Fund (IMF), with the coordination of Credit Suisse bank.

The live broadcast connected investors in Hanoi, Ho Chi Minh City, Hong Kong and Singapore, conducted at the WB office. Here, the Governor of the State Bank of Vietnam, Nguyen Van Giau, announced that Vietnam's net foreign exchange reserves were at 20.7 billion USD.

For the first and only time so far, the foreign exchange reserve figure has been stated so clearly. It is a state secret, but due to the situation, it must be announced. And it is considered to have weight in the face of foreign investors' concerns. With that scale, Governor Nguyen Van Giau affirmed at the forum: "Ensuring enough to intervene in the market".

The above example shows that state foreign exchange reserves have their own weight, which is not only limited to monetary policy.

In 2012, after a rapid and sharp decline since the announcement of the above-mentioned 20.7 billion USD, Vietnam's foreign exchange reserves have increased sharply again. The purchase figure this year is estimated at over 10 billion USD. Overall, some domestic and foreign organizations estimate that it may have reached over 20 billion USD.

According to statements or sayings of some state leaders, the current foreign exchange reserves are enough to meet nearly 12 weeks of imports of the economy.

Speaking in weeks of imports is a standard, because more than 20 billion USD for Vietnam is meaningful, but for Thailand, it is not necessarily the minimum requirement. Calculating in weeks of imports is to show the ability of the country's foreign exchange reserves to support international payments, or the ability to protect against the risk of capital flows reversing. And according to the IMF, a country with foreign exchange reserves of 12-14 weeks of imports is considered sufficient.

With that criterion, by the end of 2012 Vietnam could be more satisfied with having increased the scale of foreign exchange reserves. And more importantly, its depth value.

An expert jokingly told VnEconomy: “No matter how much you talk about it outside, people will still look at your rice barn. Your foreign exchange reserves will also be considered accordingly.”

This expert's point is that when the Vietnamese Government and enterprises go to the international market and negotiate to raise capital, partners will pay attention to the country's strength, and one "rice bowl" is foreign exchange reserves. This is also similar to one of many criteria to ensure better attraction of foreign investment capital.

A better and more obvious increase in foreign exchange reserves will contribute to improving national credit. National credit is also an important reference when international credit rating agencies evaluate enterprises. The better the rating, the lower the cost of borrowing. This is a clear and scalable value.

In 2012, Vietnam's foreign exchange reserves increased sharply, improving significantly. However, in September 2012, Moody's downgraded Vietnam's credit rating, with the main concern being the increasing bad debt problem in the banking system.

Suppose, with bad debt, foreign exchange reserves and fluctuations in the USD/VND exchange rate remain unstable as in the past few years, how far will the national credit rating go?

On the contrary, if in 2013, foreign exchange reserves continue to increase and the bad debt problem is better handled, then we can be optimistic about the prospect of a credit rating upgrade again. The remaining issue is whether that “if” is within our capabilities or not.

According to Tinkinhte-HV