Vietnam FX reserves “more than $10 billion” at the end of 2010 (MPI)

Feb 9, 2011. Vietnam’s foreign exchange reserves were “more than $ 10 billion” at the end of last year, a senior minister said, a remark that may increase concerns about the dwindling level of reserves.

Planning and Investment Minister Vo Hong Phuc’s comment was reported on Wednesday in the Vietnam Economic Times. Phuc provided no details, and it was unclear how much above $ 10 billion the reserves may be. The exact current level is guarded as a state secret.

Vietnam’s reserves began to slide in 2009 as the country faced economic problems including a depreciating dong, high inflation and wide trade deficits. Reserves were nearly US$24 billion at the end of 2008. In December 2009, the central bank estimated reserves at $16 billion.

Foreign banks have estimated as recently as late January the figure to be around, or even below $12 billion.

The central bank has had to devalue the dong five times since mid-2008, including twice last year, and confidence in the currency remains weak.

In early November, in a bid to try to break the cycle of devaluation expectations, a senior official said the government would not devalue before the lunar new year festival in early February and would tap forex reserves to meet dollar demand.

Bank of America was more bearish in a report on Jan 20, projecting that foreign exchange reserves would fall to less than one month of imports in the first quarter of 2011 and would run down to “essentially zero” by the second quarter.

“Anecdotal evidence suggests the (central bank) is already rationing FX reserves,” the report said.

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