A scheme to improve convertibility of Vietnamese currency (Vietnam dong) and mitigate dollarization of the national economy was approved under Prime Minister’s Decision No. 98/2007/QD-TTg of July 4, setting the target that by 2010 Vietnam dong will be fully convertible at home, thereby raising its convertibility in the world market in the future, alleviating the situation of dollarization in the national economy and more effectively implementing monetary and exchange rate policies.
Proposed measures include fully liberating capital and current transactions; formulating a mechanism for Vietnam dong to be used more in exporting; narrowing and eventually eliminating illegal foreign-currency pricing, payment and trading; drawing unspent foreign currency into the banking system; and increasing foreign exchange reserves.
The Government also tasked the State Bank to formulate a mainstream interest rate policy to orientate market interest rates and attach importance to harmonizing the interest rate policy and the exchange rate policy in order to ensure benefits between holding Vietnam dong and holding foreign currencies.
The State Bank will also continue pursuing a flexible exchange rate policy so as to boost exports and attract foreign investment; gradually raise foreign banks’ ratio of mobilized capital in Vietnam dong; and proceed to abolish many kinds of permits in foreign currency management and trading, especially overseas foreign-currency remittance permit for credit institutions, enterprises and individuals.