Vietnam’s Forex Reserves Forecast to Swell to $48 Billion by End-2017

Stable macroeconomic conditions have helped the Vietnamese central bank to thicken its forex reserves.

The Vietnamese central bank continues to build up its foreign currency reserves amid strong influx, and the sum is expected to reach $47.5 to $48 billion by the end of this year, VnEconomy cited sources with knowledge of the matter as saying.

The State Bank of Vietnam (SBV), the country’s central bank, has bought in another $1.5 billion worth of hard currencies over the past month, the paper said.

SBV Governor Le Minh Hung told National Assembly deputies on November 16 during a plenary session that the bank had increased its buffer fund by $7 billion in 11 months to bring the sum to a record high of $46 billion.

A continued trade surplus, remittances robust direct and indirect foreign investment inflows have been the largest sources of forex.

In addition, the government’s policy to encourage locals to convert forex holdings into the dong, the local currency, has provided support. The SBV has net purchased $8 billion to $8.5 billion worth of forex since the start of this year, higher than a surplus of $4.8 billion in overall balance of payments.

It is noteworthy that the USD/VND rate has undergone little changes although the U.S. Federal Reserve raise its benchmark interest rates by 0.25 percentage points for the third time this year. A few years ago, the exchange rate usually fluctuated widely towards the year-end due to seasonal factors.

Sebastian Eckardt, chief economist at the World Bank in Vietnam, has recently told BizLIVE that the Vietnamese government needs to continue increasing its reserve fund to better cushion external shocks.

Tuan Minh / BizLIVE