Monday , December 11 2023

Foreign exchange reserves rise to record $110 bln

Vietnam’s foreign exchange reserves have climbed to a record of nearly $110 billion, but experts say it needs to be increased further to prevent possible economic “shocks”.

The figure has quadrupled since 2015 and poses the need for establishing an agency to manage the reserves, the State Bank of Vietnam (SBV) said in a recent statement.

The amount is enough for around four months of imports, the traditional metric for assessing adequacy, compared to three months in the past.

“Vietnam has been able to achieve good growth in its currency exchange reserves in the last four years,” economist Can Van Luc told VnExpress International.

Large reserves help a country keep exchange rates stable, especially during times of crisis when the value of its currency might plunge, he said.

The International Monetary Fund prescribes a minimum of three-month worth of exports, he added.

FDI increased by 9.2 percent last year to $31.15 billion despite the impact of the Covid-19 pandemic.

Remittances, a crucial source of foreign currency for investment and development, grew by 10 percent to $12.5 billion as overseas Vietnamese still managed to send a lot of money.

But Luc said the reserves need to be even higher to absorb the possible “shocks” from negative global economic changes.

The four-month import figure is low compared to the 8-10 months for other Southeast Asian countries such as Thailand and Malaysia, he said.

“The government needs to focus on increasing exports and attracting foreign companies, remittances and tourism”.

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