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Hanoi, March 14, 2001
Mr. Horst Köhler
International Monetary Fund
Washington, D.C. 20431
Dear Mr. Köhler:
1. The government of Vietnam has adopted an economic reform program for 2001-03, which
aims to increase growth closer to potential in a low inflation environment as the key plank to its
poverty reduction strategy. To reach these goals, the government assures you of its determination
pursue sound macroeconomic policies and take firm actions to accelerate economic renovation,
and private sector development, and international integration. The details of the program are set
in the attached Memorandum on Economic and Financial Policies (MEFP) and Interim Poverty
Reduction Strategy Paper (I-PRSP). In support of this program, we are requesting a three-year
Poverty Reduction and Growth Facility (PRGF) arrangement in an amount equivalent to SDR
million (88 percent of quota).
2. The government will provide the Fund with information on a timely basis as might be
requested in connection with the progress in implementing the PRGF-supported program.
3. The government of Vietnam believes that the policies and measures set forth in the MEFP
I-PRSP are adequate to achieve the objectives of the program, but will take any other measures as
necessary for this purpose. During the period of the arrangement, the government will consult
the Managing Director, on its own initiative or at your request, concerning the adoption of
appropriate measures. Under these circumstances, the government of Vietnam will conduct with
Fund the first review of the first-year PRGF-supported program to be completed no later than
September 2001. Moreover, while the government of Vietnam has outstanding financial
to the Fund arising from loans under this arrangement, it will consult with the Fund from time to
time, on its own initiative or at the request of the Managing Director on Vietnam's economic and
4. To facilitate wider distribution of the MEFP and I-PRSP, the government of Vietnam has
authorized their publication by the Fund.
For the Government of the S.R. of Vietnam
Le Duc Thuy
State Bank of Vietnam
Memorandum on Economic and Financial Policies of
the Government of Vietnam for 2001
March 14, 2001
1. This memorandum lays out the economic and financial policies for 2001, the first
program under a three-year PRGF arrangement, and the medium-term framework
covering 2001-03. This framework is consistent with the Interim Poverty Reduction
Paper (I-PRSP), dated March 14, 2001.
II. The Current Setting and Near-Term Outlook
2. A recovery has been underway since mid-1999. The rebound in activity is being led by
export performance, and supported by expansionary fiscal and monetary policies. Real GDP
rose moderately in 1999 and further accelerated in 2000 owing mainly to large
increases in oil exports and domestic demand stimulus, but private investment, especially foreign
direct investment (FDI), remained low. Nonetheless, the external current account surplus is
to have narrowed to 2 percent of GDP in 2000, reflecting a strong increase in
Gross official reserves leveled off to US$3 billion at end 2000. Despite rapidly
consumption, the nonfood inflation rate was 2 percent in December 2000
3. The 2000 budget as implemented was supportive of recovery, and this
stance was made possible by the windfall in oil revenue. Preliminary estimates suggest that total
revenue exceeded the budgeted level by about 3 percentage points of GDP mainly on
of higher world oil prices. The overall budget deficit (official definition, including amortization
excluding onlending) is expected to be 4 percent of GDP, against 5 percent
as the excess revenue was partly offset by a major boost in spending, and also reflecting weak
performance in non-oil revenue.1 In addition, credit policy was eased in 2000 as part
the government's effort to stimulate demand. Credit was allowed to increase by 38 percent
by end year,2 double that
in 1999. In response to rising demand, the exchange rate was permitted to depreciate by
3 percent, mainly in the latter part of the year.
4. The medium-term outlook, however, remains uncertain with major policy challenges
We are convinced that high sustainable growth rates and lasting poverty reduction will require
decisive reforms to address the underlying structural weaknesses. For such reforms to succeed,
must be backed by substantial external support. Taking account of the most recent trends and
a gradual recovery in FDI inflows, we expect a substantial financing gap to emerge
during 2001-03 (see para. 29).
III. Medium-Term Macroeconomic Framework
5. Under our medium-term framework, reform policies will aim at restoring growth closer to
Vietnam's potential in a low inflation environment. These goals are central to our poverty
strategy. To reach them, we will pursue sound macroeconomic policies and take firm
actions to accelerate economic renovation, and promote efficient state and private sector
development and international integration. We will give priority to key structural areas, namely
banking and state-owned enterprise (SOE) reforms, complemented by continued private sector
deregulation and trade opening measures. With these policies, the program's macroeconomic
framework for 2001-03 aims at GDP growth of 6-7 percent per year, keeping
well under 5 percent, and increasing import coverage of gross official reserves to
9¼ weeks (Table 1). The external current account
deficit (including official transfers) is expected to average 2½ percent of GDP.
6. We will aim our overall fiscal stance at protecting medium-term sustainability, giving
focus to poverty reduction, and minimizing recourse to domestic bank financing. This stance will
be underpinned by a significant effort to boost non-oil revenue, expenditure prioritization, and
exceptional external concessional assistance to support structural reforms. The budget deficit
(official definition) is expected to average about 5 percent of GDP during 2001-03,
compared with slightly under 4 percent over the preceding three years.3 The higher deficits reflect the
accommodation of the current costs of structural reform. The underlying budget position,
of these costs, will remain prudent.
7. Monetary policy will be tightened in order to ensure low inflation, and to prevent a further
deterioration in banks' balance sheets. Banks' lending decisions will be guided by commercial
lending criteria, and policy and policy-induced lending through the state-owned commercial
(SOCBs) will be phased out consistent with the establishment of a policy bank. Increasing
will be placed on the use of indirect instruments for liquidity and credit management, and interest
rate policies will be made more market oriented. The exchange rate will be managed flexibly,
the government will submit to the National Assembly a proposal to eliminate the tax on profit
remittances by foreign-invested enterprises (FIEs) by March 2002.
IV. Macroeconomic Policies for 2001
8. Under the 2001 program, real GDP growth is projected to remain moderately
owing to robust domestic demand. Inflation is targeted at under 5 percent during this
the external current account is expected to be broadly balanced, and gross official reserves to
increase to US$3.6 billion (8¼ weeks of imports). The key macroeconomic
policies consistent with these targets are described below.
9. For 2001, our fiscal policies will continue to be accommodative while also
for structural reform costs. The budget as approved by the National Assembly envisaged the
to be capped at 6 percent of GDP based on conservative revenue estimates. The Assembly
also decided that this deficit should be reduced by 40 percent of any central government
revenue in excess of budget. Fund staff estimates based on the current WEO oil price assumption
would point to a deficit of around 5 percent of GDP.4 We aim to keep revenue and grants at
about 20 percent of GDP, through strong efforts on non-oil revenue to offset the
anticipated impact of lower world oil prices. Total expenditure including amortization is
to stay at around 25 percent of GDP. The deficit would be financed mostly from domestic
nonbank sources and external concessional loans. The key policy elements are:
- Focusing tax policies on strengthening and streamlining VAT and customs collections
reverse the recent sharp decline in non-oil revenue as a percent of GDP. Domestic pricing
policy for petroleum products will be guided by the need to safeguard revenue. In line with this
policy, import tariffs for petroleum products were reimposed in January 2001 in response
lower world oil prices.
- Over the next two years, reducing the number of VAT rates and the scope for
under the VAT and customs. To enhance non-oil revenue performance, technical assistance from
Fund for tax policy and administration is being sought.
- Ensuring funding for critical areas, while keeping expenditure restrained overall.
will be redirected toward key social services, especially for primary education and basic health
services, and for vital social and economic infrastructure (in particular for rural development) in
support of poverty reduction. To ensure funding for such spending, the 16 percent increase
in government wages this year is being accompanied by a cut in administrative staff so as to
the growth in the wage bill in the coming years, and by economies in spending as necessary.
Subsidies to SOEs will be avoided.
- Enhancing expenditure management and fiscal transparency through improving fiscal
reporting—including expanded publication of the annual budget (and its outturn), centralizing
reporting in the Treasury, and over time bringing into the budget presentation extrabudgetary
revenues (and associated expenditures).
10. The costs of banking and SOE reforms over the period 2001-03 are being
Current estimates, based on costing banking reform on Vietnamese accounting standards (VAS),
the total costs at 7 percent of GDP (VND 35 trillion). (Under international
accounting standards (IAS) and including debt resolution for SOEs not undergoing ownership
transformation, and with the methodology and assumptions used by the Fund staff, total reform
would be 12 percent of GDP (VND 60 trillion).) The main cost components,
under VAS, are:
- The current costs of reforms (totaling VND 11 trillion), including the
costs of government bonds and safety net costs for SOE labor redundancies (partly covered
the Enterprise Restructuring Fund).
- The capital costs (VND 24 trillion) for absorption of reformed SOEs'
nonperforming debt and the resolution of other nonperforming debt through banks' debt recovery
efforts, recapitalization of the SOCBs, and the restructuring of joint-stock banks (JSBs). These
capital costs will be treated as an extraordinary outlay and financing item, and will be shown in a
separate calculation of an expanded measure of the overall fiscal deficit.
The main financing sources comprise banks' internal resources, including loan recoveries and
strengthened profitability, nonnegotiable government bonds, bank bonds sold to the public,
concessional external support, and other budgetary resources.
11. Tentative estimates based on preliminary data suggest the reform costs in 2001
be about VND 11 trillion, or 2½ percent of GDP. We are prepared to
prudently meet these costs, including through the mobilization of external support, our own
resources, and expenditure savings. Reform costs will be assessed periodically, including at the
of the first PRGF review.
12. Monetary policy will be tightened, consistent with the inflation and reserves objectives,
also to safeguard the banking system. In line with the ongoing level of economic activity, credit
growth is to be in the range of 20-25 percent year-on-year by
(Table 2). Credit will be provided only to efficient projects of
creditworthy borrowers—state and nonstate—in line with the monetary program under the PRGF.
a result, the rate of expansion of total liquidity in 2001 is projected at 23 percent.
Consistent with these targets, the performance criterion for net domestic assets of the banking
for end-June 2001 and benchmarks for end-September and end-December 2001 are
set out in Table 3. To achieve these targets, the State Bank of
Vietnam (SBV) will limit its gross refinancing to banks to no more than
VND 3.5 trillion, and will, if necessary, impose bank-by-bank credit ceilings. It
also rely increasingly on indirect instruments, including through a more active use of the discount
rate and more effective conduct of open market operations. At the same time, interest rate policy
be made more flexible, notably through strengthening the base interest rate system. Credit and
monetary developments and policies will be reviewed by the SBV on a quarterly basis in
consultation with the Fund staff.
13. In support of structural reforms and in view of the current reserves position, the SBV will
manage the exchange rate more flexibly, giving a greater role to market forces and minimizing
administrative measures. It will also take steps to further deepen the interbank foreign exchange
market. During the program period, the SBV will limit its intervention in the interbank market to
meeting its international reserves target. The foreign balancing requirement for FIEs was
in 2000. The surrender requirement, which was lowered from 80 percent to
50 percent in 1999, will be phased out as and when economic circumstances permit
and at the latest by the end of the PRGF arrangement. Subject to the acceptance by the National
Assembly of the proposal on the tax on profit remittances of FIEs, all remaining exchange
restrictions on current international transfers and payments will be removed by end 2002
order to pave the way for acceptance of the obligations under Article VIII,
3, and 4 of the Fund's Articles of Agreement.
V. Structural Policies
14. Decisive structural reforms are vital for putting Vietnam on a sustainable high growth
necessary for a reduction in poverty. We will gear structural reforms toward strengthening
competitiveness, opening up the economy, and attracting investment, both domestic and foreign.
medium-term strategy is therefore to reform the banking and SOE sectors and to strengthen
efficiency, in order to accelerate the transition toward a market-based economy and to promote
private sector activity. The I-PRSP and its policy matrix outline the envisaged reforms over the
PRGF arrangement's period.
A. Banking Sector Reform
15. In the banking sector, our reform strategy aims at restoring soundness to the system and
improving the efficiency of financial intermediation. We have adopted a reform approach
to minimize the potential fiscal costs of reform, avoid moral hazard, and maintain systemic
consistent with the program's medium-term macroeconomic framework. Central to this approach
strong efforts to stem the flow of bad loans, phase out policy lending, and put bank operations on
a commercial basis.
16. Reform measures are being concentrated on resolving deep-seated problems at the
through adoption, in March 2001, of a restructuring framework in coordination with SOE
reform. With World Bank technical assistance, a medium-term plan has been adopted for
Vietcombank (VCB) (representing 10 percent of domestic bank credit) and restructuring
for the other three banks (Incombank (ICB), Bank for Agricultural and Rural Development
(VBARD), and Bank for Investment and Development (BIDV), representing 60 percent of
domestic bank credit) will be formulated at the latest by mid-2001. In addition, by
the government will seek to secure, for one of the SOCBs, strategic equity participation with a
reputable foreign partner.
17. To start the bank restructuring process, Decision 284 will be amended before
end 2001, to bring loan classification and loan-loss provisioning in line with international
standards. In the interim, in order to assess the true financial positions of these banks, we plan to
complete as soon as possible audits on IAS for the financial accounts of fiscal year 2000
VCB and ICB, and in any case at the latest by end 2001. In addition, IAS audits for
and BIDV will be conducted under the terms of the World Bank's Rural Credit 2 Project,
the latest by early 2002. Furthermore, the SOCB plans will adhere to the following
- Strengthen management accountability and corporate governance in order to increase
independence, profitability, and commercial orientation. At the same time, the government will
eliminate policy lending by the SOCBs except under limited and explicitly identified
with government guarantees.
- Set up an asset management company (AMC) to absorb only collateralized
loans (NPLs) of banks at market value.
- Resolve NPLs through the AMCs and loan workout units of banks. The debt resolution
process will include loan reductions and write-offs only for SOEs that are subject to liquidation,
divestiture, or equitization under the SOE reform program.
- Phase recapitalization of each SOCB over three years, with the pace conditioned on each
bank's ability to meet specified conditions on financial performance, verified by external audits
international standards. These performance indicators will include, among others, annual targets
the recoveries of NPLs.
Implementation of SOCB reform will be monitored jointly by the SBV and the Ministry of
Finance (MoF), and technical assistance is being sought from the Fund. Progress in
this reform will be assessed in consultation with the World Bank by the first PRGF review.
18. We will continue to restructure and strengthen the JSBs. The SBV has
its financial assessment of the 48 JSBs and has approved restructuring plans for all of
Restructuring efforts will be accelerated, and we are prepared to revoke licenses of and/or merge
banks now under special control/supervision by October 2001. Improvements will be
to mechanisms for rehabilitating marginally capitalized but viable banks and for addressing
ones. Over the medium term, we envisage the JSB system to be rationalized with a substantially
smaller number of banks.
19. Continued efforts will be made to strengthen the regulatory framework and supervisory
oversight of all banks. Regulations have been adopted to upgrade the legal and prudential
for, and supervision of, the banking system. The legal framework for creditor rights will be
strengthened, especially with respect to the foreclosure of collateral, liquidation of assets on a
basis, and transfer of land-use rights. The SBV will develop and implement policies and
required for a risk-based approach to banking supervision. On-site and off-site bank supervision
also be reinforced. During the PRGF arrangement's period, accounting standards governing the
financial sector will be moved further towards international practices.
B. State-Owned Enterprise Reform
20. In tandem with SOCB reform, we have adopted and will announce soon a medium-term
reform program covering 2001–03. This program is designed to curb SOE losses
improve the efficiency and competitiveness of the enterprise sector. Over the
we are aiming at subjecting 1,800 out of 5,571 SOEs to reform measures (including
1,411 equitizations, 142 divestitures, and 219 closures/liquidations), and a
further 197 SOEs would be merged. This program will cover around
of SOEs' debt, according to preliminary figures. As a necessary adjunct to SOCB reform, we aim
reinforce this program over time by including additional nonviable loss-making SOEs for
closure/liquidation, and highly leveraged, larger SOEs in the list of enterprises subject to reform.
21. To implement this reform plan, we are taking concrete measures to promote
equitization/divestiture and ease the transition of affected workers. We are developing a program,
to be funded from our own and concessional external resources, to give priority to resolving debt
the above reforming SOEs. Debt of other SOEs will be resolved only after a satisfactory
plan involving labor redundancies has been approved by the MoF, and such resolution will be
to financing availability. To streamline the equitization process, the implementing decree will
be revised to expand capital and security markets, to remove the caps on the size of
and to improve the transparency of the process. Social safety nets will be provided through the
newly-established Enterprise Restructuring Fund.
22. In order to strengthen the financial discipline on SOEs, a monitoring system has been put
in place, on a quarterly basis, for a targeted group of 200 large SOEs' outstanding
to banks and to the government and other budget support.
23. We are strengthening the implementation mechanism for SOE reform, but substantial
technical assistance will be required. In particular, the National Steering Committee for
Reform and Development has been upgraded and is being chaired by the First Deputy Prime
Minister. Technical assistance is being provided by the World Bank and other donors concerning
social safety nets, pilot restructuring of three general corporations, and the implementation of
equitization and divestiture.
C. Other Structural Areas
24. We will continue to vigorously pursue international integration as a means to strengthen
competitiveness. Our trade policy is being built on the implementation of commitments under the
ASEAN Free Trade Area (AFTA) and the recently concluded bilateral trade agreement with the
United States. In particular:
- We have adopted and will publish by end-March an import-export regime
for 2001-05, including a timetable for a phased removal, on a multilateral basis, of
quantitative restrictions (QRs), which will be replaced by tariffs and completed by the start
of 2003 at the latest for six products (cement and clinker, remaining steel products, paper,
construction white glass, vegetable oil, and granite and ceramic tiles). Accordingly, at the start
of 2003, QRs will only remain on five products (motor cars, motorcycles, sugar, alcohol,
petroleum products), and other currently banned imports as stipulated in the attachment to the
mentioned import-export regime.
- AFTA tariffs on the majority of tariff lines of products subject to the tariff reduction
roadmap of AFTA, will be reduced to at most 20 percent by the start
and further to 0–5 percent by the start of 2006.
- Trading rights for domestic firms have been fully liberalized, permitting all
business-registered domestic firms to import any goods, in line with enterprise and commercial
Trading rights for foreign-invested firms will be liberalized through further amendments to the
Foreign Investment Law.
- Rice export quotas were removed starting 2001; restrictions on enterprises
to export rice and rice export licensing will also be lifted, and a more liberal regime adopted.
- The government will cease granting any new and phase out all existing ad hoc
exemptions on import tariffs during 2001–03.
25. We have adopted a broad range of measures to promote the private sector, by easing
to entry and leveling the playing field vis-à-vis the state sector. In addition to the other
sectoral measures, a significant number of implementing regulations for the new Enterprise Law
have been issued that sharply reduce the number of sectors requiring business licensing and make
business registration virtually automatic. Furthermore, access to bank credit by the private sector
been improved by allowing the use of land use rights and other fixed assets as collateral. We
removed the approval requirements for establishing foreign investment in a number of exporting
activities. We have also increased the flexibility for forming 100 percent foreign-owned
enterprises, and have begun phasing out the dual pricing system for labor costs and utility rates
FIEs. Further liberalization of the environment for foreign investment will be undertaken during
PRGF arrangement's period.
VI. Statistical Issues and Policy Transparency
26. We are taking steps to improve data quality, transparency, and timeliness of data
Efforts will be made to strengthen the quality of data on the national accounts and balance of
payments, in particular FDI; technical assistance is being sought from the Fund. To better inform
public of the intentions and outcomes of economic policy and to bolster investor confidence, we
begun publishing the annual state budgets, and a Vietnam page is now included in the
Government Finance Statistics Yearbook. In addition, we will expand the range
published fiscal data, and finalize a Vietnam page in International Financial Statistics by
27. Regarding reporting of data, we will reduce the reporting lag for monetary and external
sector data, and improve the timeliness and frequency of the reporting to the Fund for certain
financial sector data. Furthermore, we will accelerate preparation for Vietnam's participation in
Fund's General Data Dissemination System.
28. In connection with assessments to safeguard the use of Fund resources, we intend to
an external audit of the financial statements of the SBV in line with the Law on State Bank of
Vietnam by June 2002.
VII. Program Financing
29. With the policies described above and in the I-PRSP, the external current account deficit
projected to widen to an average of about US$0.9 billion per year
of GDP) during 2001-03. Vietnam's capacity to secure external financing will depend
critically on maintaining macroeconomic stability and timely implementation of reforms.
the external financing gap is projected to total about US$1.2 billion
In addition to PRGF support, this gap would be covered by program lending from the World
(including under the parallel programmatic Poverty Reduction Support Credit (PRSC)), and other
multilateral and bilateral assistance on concessional terms.
30. In view of our limited debt servicing capacity, external borrowing will be kept in check
closely monitored to ensure a sustainable debt burden. The rescheduling agreement on
ruble debt to Russia was finalized in September 2000. As regards the contracting or
guaranteeing by the public sector of new nonconcessional loans, the government will observe the
external debt ceilings for the first-year program. The government will also not incur any arrears
external payments during the period of the PRGF program.
VIII. Program Monitoring
31. The period for the first-year PRGF program is the calendar year 2001. The first
under the PRGF arrangement will be undertaken with the Fund by September 2001 to
implementation of macroeconomic policies and progress in banking and SOE reforms. The
review will be undertaken by March 2002. Quantitative performance criteria and
are summarized in Table 3. The prior actions for approval of
PRGF arrangement and structural performance criteria and benchmarks are in Table 4. Their measurement and monitoring, as well as other
program reporting requirements, are described in the attached Technical Memorandum of
Understanding on program monitoring (Annex).
32. The government believes that the policies described above are adequate to achieve the
objectives of the program and, on this basis, hereby requests approval of the PRGF arrangement.
government stands ready to take any additional steps that may be necessary and will consult the
on this matter in line with established Fund procedures.
Attachments (Use the free Adobe Acrobat Reader to view the Tables listed below).
Table 1. Vietnam: Medium-Term Macroeconomic
Table 2. Vietnam: Monetary
Table 3. Vietnam: Quantitative Performance Criteria and
Benchmarks Under the First-Year PRGF Program
Table 4. Vietnam: Key Structural Policy Actions Under
First-Year PRGF Program
Annex. Technical Memorandum of Understanding
1On a more standard definition, the deficit (excluding
amortization and onlending) is estimated at about 2 percent of GDP in 2000,
with 3 percent budgeted.
2Measured based on an
expanded coverage of the banking system to encompass the State Bank of Vietnam and
89 credit institutions.
3Using the standard
the deficit is projected to average around 3 percent of GDP during 2001-03,
with 1 percent during the previous three years.
4About 3 percent of
GDP excluding amortization and onlending.
Vietnam-Technical Memorandum of
March 14, 2001
This memorandum sets out (i) the definitions of quantitative performance criteria and
benchmarks for the first-year PRGF-supported program (Table 3),
and (ii) related reporting requirements to the Fund's Asia and Pacific Department (Table 5).
Item 1: Net domestic assets (NDA) of the banking system
- Defined as total liquidity minus net foreign assets of the banking system.
- Total liquidity is defined as the sum of dong liquidity (currency outside the banks,
and deposit substitutes) and foreign currency deposits with the banking system; deposits are
to exclude government deposits.
- Net foreign assets of the of the banking system are the sum of net foreign assets of the
and net foreign assets of the deposit money banks (DMBs).
- Net foreign assets of the DMBs are defined as foreign assets minus foreign
liabilities. Foreign assets comprise gold, foreign currency holdings, and claims on nonresidents.
Foreign liabilities comprise all liabilities to nonresidents.
Item 2: Net claims on the government of the banking system
- Defined as the claims on government minus deposits of the government with the
- Claims comprise advances to the state budget, investment in government securities, and
other forms of credit to the state budget.
- Government securities will be measured at the transaction price. Repayments of
securities will exclude interest payments, either as coupon interest or the discount.
- Government onlending funds financed by ODA are excluded from government
Item 3: Credit to the state-owned enterprises from the banking system
- Defined as the sum of all claims on the state-owned enterprises (SOEs) by the banking
- SOEs are defined as wholly state-owned enterprises.
Item 4: Credit from the banking system and from the budget and budget support to
the 200 targeted large SOEs
- Credit from the banking system is defined as under Reporting Form 2 of the Ministry
Finance (MoF) as specified in the Decision on the Promulgation of the Regulation on the
Monitoring System for 200 SOEs.
- Credit from the budget and budget support is defined as under Reporting Form 3 of the
as specified in the above mentioned regulation.
- The list of targeted large SOEs is given in Table 6.
Item 5: Nonconcessional publicly contracted or guaranteed foreign currency loans or
external debt to nonresidents
- Defined as the sum of all new foreign currency loans or other external debt to
contracted or guaranteed by the central government (including the SBV), that have a grant
of less than 35 percent of the overall value of the loan's original principal. Local
and agencies cannot contract external debt, and SOEs cannot guarantee such debt.
- The grant element is to be calculated by using the currency-specific discount rates
by the OECD as Commercial Interest Reference Rates (CIRR) as of
December 31, 2000; for maturities of less than 15 years, the grant element will be
calculated based on six-month averages of the commercial interest rates, and for maturities of 15
years or longer, the grant element will be calculated based on 10-year averages. Maturity will be
determined on the basis of the original loan contract.
- This performance criterion will apply to all current (not contingent) liabilities
are created under a contractual arrangement (including loans, supplier's credits and leases)
the provision of value in the form of assets (including currency) or services, and which require
obligor to make one or more payments in the form of assets (including currency) or services at
future point(s) in time to discharge the principal and/or interest liabilities incurred under the
- For maturities of up to one year, the ceiling will apply to the amount of the stock of
currency loans or other external debt to nonresidents contracted or guaranteed by the government
- Excluded from the limits are changes in indebtedness resulting from rescheduling
(including the deferral of interest on commercial debt) and normal import related credits, and
extended by the IMF.
- Debt falling within the limit of this definition shall be valued in U.S. dollars at
bilateral market exchange rate prevailing at the time the contract or guarantee becomes
Item 6: External payments arrears
- Defined as the stock of overdue payments (interest and principal payments) on
debt in convertible currencies with an original maturity of up to and including one year (spot,
market, letters of credit, and others) and medium- and long-term debt contracted or guaranteed by
the government (including the SBV).
- The limit excludes those overdue payments that relate to debts which are subject to
rescheduling or a stock-of-debt operation.
- As of end-December 2000, there were no reported external arrears, except for
totaling US$57.3 million with Algeria currently under negotiation.
Item 7: Net official international reserves (NIR)
- Defined as foreign assets minus foreign liabilities of the SBV, expressed in
U.S. dollars and valued at the program monitoring exchange rates (see Section II).
- Foreign assets comprise gold, foreign currency holdings, and claims on nonresidents. As
such, these assets must be readily available, i.e. sellable at any time and free of any pledges or
encumbrances, and directly and exclusively controlled by the SBV. These assets will exclude
holdings of nonconvertible currencies, claims on nonresident financial institutions denominated
nonconvertible currencies, holdings of foreign exchange of government ministries, the foreign
currency counterpart of banks' reserves held at the SBV to meet reserve requirements on foreign
currency deposits, and such other claims that are not readily available.
- Foreign liabilities are liabilities to nonresidents contracted by the SBV, including
of foreign governments, foreign central banks, foreign DMBs, and international organizations,
irrespective of their maturity. They also include IMF purchases and disbursements.
II. Program monitoring exchange rates
Foreign assets and liabilities and all other elements of the items defined above that are
denominated in foreign currency will be valued at the program monitoring exchange rates, unless
- Holdings in gold will be valued at Vietnamese dong (VND) 480,000 per Vietnamese
(equivalent to 3.75 grams).
- Assets and liabilities denominated in SDRs, including the SDR value of gold
holdings and assets and liabilities resulting from transactions with the IMF will be converted at
rate of US$1.302 per SDR.
- Assets and liabilities denominated in currencies other than the U.S. dollar will be
converted into U.S. dollars at the market rates of the respective currencies prevailing on
December 29, 2000, as published in International Financial Statistics (IFS).
- The U.S. dollar value of assets and liabilities will be converted into Vietnamese
at the official rate of the SBV on December 29, 2000, which was VND 14,501 per
III. Performance Criteria and Benchmarks
Performance criteria include Items 1 to 3 and 5 to 7 as defined above. For external
payments arrears (Item 5), the performance criterion will be measured on a continuous basis
throughout 2001. The other criteria will be measured on the last days of June and
December 2001, except for NDA of the banking system (Item 1), which will be measured
a performance criterion on the last day of June 2001 only. Quantitative
include Items 1 to 5 and 7 as defined above. They will be measured on the last days of March and
September 2001; for NDA of the banking system (Item 1) also on the last day of
December 2001; and for credit from the banking system and from the budget and budget
support to the 200 targeted large SOEs (Item 4) also on the last days of June and
VI. Monitoring and Reporting Requirements
For the purposes of program monitoring, the following information, including any revisions
historical data, will be provided by the SBV, unless specified otherwise, to the Asia and Pacific
Department of the Fund, through the office of the Senior Resident Representative of the IMF in
Vietnam, as set out in Table 5.
Attachments (Use the free Adobe Acrobat Reader to view the Tables listed below).
Table 5. Vietnam: Monitoring and Reporting
Table 6. Vietnam: List of 200 Large Debt
Enterprises in the Debt
1These definitions, except Items 4, 5, and 6, adhere
to the existing classification schemes used for the monetary derivation tables of the State Bank of
Vietnam (SBV) covering 89 credit institutions and the SBV, and the associated monetary
survey tables. More specifically, the banking system is defined as the SBV and the deposit
banks (DMBs), which consist of six state-owned commercial banks (SOCBs), 46 joint stock
4 joint venture banks, 26 foreign bank branches, 6 finance companies, and the Central People's