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Vietnam: Staff Report For The 2018 Article IV Consultation—Informational Annex

Author(s):
International Monetary Fund. Asia and Pacific Dept
Published Date:
July 2018
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Fund Relations

(As of March 31, 2018)

Membership Status

Joined: September 21, 1956; Article VIII

General Resources Account

SDR MillionPercent of Quota
Quota1,153.10100.00
Fund holdings of currency1,153.10100.00
Reserve position in Fund0.010.00

SDR Department

SDR MillionPercent Allocation
Net cumulative allocation314.79100.00
Holdings269.7785.70

Outstanding Purchases and Loans: None

Latest Financial Arrangements

In millions of SDRs (mm/dd/yyyy)

TypeDate of ArrangementExpiration DateAmount ApprovedAmount Drawn
ECF104/13/200104/12/2004290.00124.20
ECF111/11/199411/10/1997362.40241.60
Stand-By10/06/199311/11/1994145.00108.80

Formally PRGF.

Formally PRGF.

Projected Payments to Fund

In millions of SDRs (based on existing use of resources and present holdings of SDRs)

Forthcoming
20182019202020212022
Principal
Charges/interest0.290.390.390.390.39
Total0.290.390.390.390.39

Exchange Arrangement

The exchange rate arrangement is classified as defacto stabilized. The de jure arrangement is managed floating. The State Bank of Vietnam (SBV) is gradually increasing exchange-rate flexibility. In August 2015 it widened the VND/USD trading band to +/-3 percent from +/-1 percent while devaluing the central parity by one percent. In January 2016 it announced the VND/USD rate would be adjusted daily rate based on (i) the previous day’s weighted average dong/USD exchange rate; (ii) a weighted average of movements in dong exchange rates vis-à-vis seven other important trading partners’ currencies; and (iii) domestic macroeconomic conditions.

Vietnam maintains an exchange system free of restrictions on the making of payments and transfers for current international transactions, except for those exchange restrictions imposed for security reasons of which Vietnam has notified the IMF pursuant to Executive Board Decision No. 144- (52/51), 8/14/52.

Article IV Consultations

Vietnam is on a 12-month consultation cycle. The previous Article IV consultation was held in Hanoi during April 16–31, 2017, and was concluded by the Executive Board on July 7, 2017.

Technical Assistance

In early 2017, Vietnam received technical assistance (TA) from FAD on upgrading the tax administration organization and from MCM on modernizing the monetary policy framework. In 2018, a high level MCM-APD workshop was held to share cross-country experiences regarding modernization of monetary policy framework with Vietnamese policymakers. During the last year, STA provided TA on Government Finance Statistics, National Accounts and Consumer Price Index. In addition, TAOLAM provides TA on external sector statistics and STI organizes trainings.

In recent years, Vietnam has received TA in the areas of statistics (government finance, external sector, price, and national accounts), reserve management, debt management, bank resolution, stress testing the banking sector, and monetary operations and liquidity management. From December 2008 to January 2012, a resident advisor assisted the authorities in improving banking supervision. The IMF-World Bank Financial Sector Assessment Program was undertaken during 2012–13.

Resident Representative

Mr. Jonathan Dunn is the Resident Representative for Vietnam and Lao P.D.R., based in Hanoi.

Relations and Collaboration with the World Bank Group

(As of April 30th, 2018)

World Bank Group Partnership Framework

The current World Bank Country Partnership Framework FY2018–22 (CPF) was discussed by the World Bank Board of Directors on May 30th, 2017. Aligned with the government’s Socioeconomic Development Plan (SEDP 2016–20), the proposed CPF highlights the importance of sustaining the country’s strong track record of development and poverty reduction through an inclusive growth strategy that balances economic prosperity with environmental sustainability, promotes equity and social inclusion, and strengthens state capacity and accountability – all within a constantly evolving global and domestic context. The CPF outlines key priorities for World Bank Group support across three focus areas: (i) enable inclusive growth and private sector participation; (ii) invest in people and knowledge; and (iii) ensure environmental sustainability and resilience, with governance as a cross-cutting engagement area. The CPF introduces a number of strategic shifts that aim to focus WBG engagements around transformative development priorities that are key for Vietnam to achieve identified development goals. Having achieved Middle Income Status, Vietnam has graduated from the International Development Association (IDA) in June 2017 to full International Bank for Reconstruction and Development (IBRD) status.

World Bank Group Program

The World Bank Group uses a broad range of instruments including development policy financing, program for results (PforR), investment project financing, and advisory services and analytics; the IFC’s equity, loan, and advisory services and the Mekong Private Sector Development Facility (MPDF); and Multilateral Investment Guarantee Agency (MIGA) activities. The World Bank Group cooperates with various development partners and takes an active role in ODA coordination.

Scale of the World Bank Group program: The existing WB portfolio is large, with 47 active IDA/IBRD operations, with the total net commitments of US$10.52 billion (including US$63 million grant co-financing). During the FY14–16 cycle, IFC’s cumulative committed investments in Vietnam totaled US$2.2 billion, of which US$143 million is in long-term financing. For FY18 three IBRD/IDA Transition Support operations are currently scheduled for board approval.

IDA and IRBD Lending program: The World Bank has a diversified lending program in Vietnam, supporting infrastructure, human development, and improvement in economic management and governance. Support to infrastructure includes renewable energy generation, transmission and distribution; rural and national road development and inland waterways; water supply and wastewater treatment, irrigation systems rehabilitation, and natural resources management. The program also supports development of health systems to ensure increased access to quality health services and education quality and access improvements. The World Bank makes use of all available lending instruments, with the bulk provided through investment finance and selected development policy finance operations and programs for results. The Bank is preparing the first subnational Development Operation with Ho Chi Minh City which reinforces reforms to enhance urban governance and transparency in urban planning, land management, fiscal management and service delivery.

IFC Program: While IFC’s earlier investments were often in the form of traditional project-finance to the FDI sector, IFC has been increasingly engaged with the domestic private sector to support corporatization of domestic private sector enterprises in their next phase of development to become professionally-run/public listed corporations. Under the joint-WBG strategic approach in agribusiness, IFC has engaged with rising local entrepreneurs with focus on investments in downstream processing and warehousing. The strategic focus on the renewable energy sector (hydropower, solar and wind) has resulted in IFC’s first equity investment in GEC, a privatized power company which owns and operates small and medium-sized hydro-power plants as well as wind and solar farms under development. IFC continues its support to the consolidation of the banking sector through engagements with local private banks with both liquidity support (the Global Trade Finance Program) and long term funding (senior debts, tier II capital and equity).

Knowledge program: The World Bank supports the government’s efforts to strengthen institutional capacity through its extensive program of analytical and advisory services. With Vietnam’s development as a dynamic middle income economy the partnership with the World Bank Group is evolving, and knowledge generation and the sharing of global experiences are becoming increasingly important. In 2016, the Government of Vietnam and the World Bank finalized the joint Vietnam 2035 report, which identifies policy reforms to achieve Vietnam’s long term development aspiration of sustaining rapid growth and social inclusion. While reflecting Vietnam’s remarkable development trajectory, the report identifies emerging structural constraints to the existing mostly factor driven growth model, including stagnating labor productivity growth and rising investment inefficiency. The report lays out an ambitious reform agenda structured around three pillars: (i) balancing economic prosperity with environmental sustainability, (ii) promoting equity and social inclusion and (iii) bolstering the state’s capacity and accountability. Other recent analytical work includes a Vietnam Development Report on Transforming Vietnamese Agriculture, the 2016 Vietnam Systematic Country Diagnostic and the 2017 Public Expenditure Review. In addition, the World Bank continues to provide technical assistance in areas such as trade policy and trade facilitation, social protection, renewable energy, innovation, trade and logisctics, gender and ethnic minorities, climate change adaptation, financial sector reform, public financial management and debt management.

IMF-World Bank Group Collaboration in Vietnam

Specific Areas: Since the expiration of the PRGF in April 2004, the two institutions have closely collaborated on monitoring the macroeconomic situation and routinely exchanging views on macroeconomic and fiscal management as well as key structural reforms, such as SOE and banking sector reforms. The two institutions consult during Article IV consultations in order to share information and help coordinate on key policy messages. The IMF has provided macroeconomic assessment letters in support of the Bank’s development policy operations. Building on joint IMF and World Bank Financial Sector Assessment Program (FSAP), which was completed during 2012–13, joint work has continued in supporting central bank operations, with the IMF providing TA on monetary policy and operations, and both the World Bank and IMF providing support on banking supervision. In the areas of fiscal management, the World Bank and the IMF are coordinating the policy dialogue on fiscal consolidation and debt sustainability, including on policy options to enhance resource mobilization and improve the efficiency of public spending. Finally, the IMF and the World Bank also collaborate in the development and timely dissemination of reliable economic and financial statistics. The IMF focuses on improving balance of payments, national accounts, price, and government finance statistics, while the World Bank provides assistance on issues related to the production of high-quality household and enterprise surveys and facilitate the implementation of National Gender Indicators System.

World Bank Lending Program FY17–18
FYProject NameIBRD* US$ millionIDA US$ million
2017Land Governance and Resources Information Project150
2017Energy Efficiency for Industrial Enterprises Project1002
2017Coastal Cities Sustainable Environment Project46190
2017Northern Delta Transport Additional Financing79
2017Additional Financing for Danang Sustainable City Development Project72
2017Support for Autonomous Higher Education Project155
2017Scaling up Urban Upgrading Project240
2017Medium Cities Additional Financing for Lao Cai and Phu Ly53
2017Forest Modernization and Coastal Resilience Project150
2017Central Region Flood Emergency Project113
2017Central Highland Connectivity Project1530
2017National Targeted Programs Support Program153
Total1461507
2018Ho Chi Minh City Development Policy Loan100
2018Dynamic Cities

Investing and Innovating for Grassroots Health
80
2018Service Delivery
Total326

including IDA Transition Support

including IDA Transition Support

Relations with the Asian Development Bank

(As of April 18, 2018)

The Asian Development Bank (ADB) has been working in partnership with the Government of Vietnam—a 1966 founding member of ADB—since the resumption of operations in 1993. The country partnership strategy (CPS), 2016–2020 of the Asian Development Bank (ADB) for Vietnam will support investments and policy reforms that promote more inclusive and environmentally sustainable economic growth. To achieve this, ADB’s strategic framework will be based on three pillars: (i) promoting job creation and competitiveness, (ii) increasing the inclusiveness of infrastructure and service delivery, and (iii) improving environmental sustainability and climate change response. ADB also works to enhance policy reform and institutional capacity in the financial sector and public financial management.

ADB is supporting the implementation of structural reforms that increase competitiveness and assist Vietnam in transitioning to become an upper middle-income country. This includes lending assistance and policy dialogue on financial sector and state-owned enterprise (SOE) reform issues. To increase the efficiency of public expenditure and improve the quality of infrastructure and public services ADB is also working with government to strengthen fiscal and budgetary management.

Vietnam is one of the largest concessional ordinary capital lending (COL) recipients, with projected COL allocation of US$950.65 million for 2017–2018. Ordinary capital resources (OCR) are also actively being used for projects with higher rates of return, such as infrastructure, which approved lending of US$102.0 million in 2017(Table 1).

Table 1.Lending (Approved Amount) and Disbursement by Year, 1993–2017(In millions of U.S.dollars)
Approved amount1/Disbursement
YearOrdinary Capital ResourcesAsian Development FundTotalTotal
19932622620
19941401403
199523323348
199630330329
1997360360149
1998284284128
199940180220191
2000189189219
2001243243176
2002234234232
2003179179233
2004120176296182
2005360218578224
2006308308184
20079245151,439230
2008606159765265
20092/1,4035231,9261,093
20105105801,090407
20117223651,086792
20128224631,285623
20134103657751,226
20147404091,1491,228
20157382901,027899
2016368.7403.8772.5838
2017102367469516
Source: Asian Development Bank

Includes loan components of regional projects in Vietnam

Excludes a guarantee of $325 million for EVN (Loan No. 2604, approved on 12/11/09)

Source: Asian Development Bank

Includes loan components of regional projects in Vietnam

Excludes a guarantee of $325 million for EVN (Loan No. 2604, approved on 12/11/09)

From October 1993 until December 31, 2017, ADB has provided 178 sovereign loans totaling US$15.45 billion, 320 technical assistance grant projects amounting to US$310.6 million and 39 grant projects totaling US$329.5 million to Vietnam (Tables 24). As a catalyst for private investments, ADB provides direct financial assistance to nonsovereign public sector and private sector transactions in the form of direct loans, equity investments, guarantees, B loans, and trade finance. Since its inception, ADB has approved $480 million in nonsovereign financing for seven private sector transactions in Vietnam. Total outstanding balances and commitments of ADB’s private sector transactions in the country, as of December 31, 2017, amount to $755 million, representing 6.8% of ADB’s total nonsovereign portfolio. ADB’s Trade Finance Program (TFP) fills market gaps by providing guarantees and loans through partner banks in support of trade. The TFP has completed over 12,000 transactions supporting over $23 billion in trade and over 7,700 small and medium sized enterprises since 2004. In 2015, the TFP supported $2.5 billion in trade through over 1,900 transactions. In Vietnam, the TFP works with 12 banks and has supported over $6.5 billion in trade across 4,303 transactions since 2009. In addition to filling market gaps, the TFP’s objective is to mobilize private sector capital and involvement in developing Asia. In Vietnam, 67.6% of the trade supported through the TFP was co-financed by the private sector. Vietnam also receives substantial support under the Greater Mekong Sub-region initiatives, involving Cambodia, China, Lao P.D.R., Myanmar, Thailand, and Vietnam. As part of its regular operations, ADB coordinates closely with Vietnam’s development partners to improve the effectiveness, efficiency, and impact of its lending and non-lending programs. ADB also works closely with civil society organizations and the private sector in Vietnam to mobilize financial resources and expertise from other partners. ADB is an active member of the Six Banks Initiative—comprising ADB, Agence Française de Développement (AFD), KfW, Japan International Cooperation Agency, Export Import Bank of Korea, and the World Bank. Co-financing operations enable ADB’s financing partners, governments or their agencies, multilateral financing institutions, and commercial organizations, to participate in the financing of ADB projects. The additional funds are provided in the form of official loans and grants, and commercial financing, such as B loans, risk transfer arrangements, parallel loans, and co-financing for transactions under ADB’s TFP. As of December 31, 2015, cumulative direct value-added (DVA) official co-financing for Vietnam amounted to $4.3 billion for 54 investment projects and $106.5 million for 87 technical assistance projects. Cumulative DVA commercial co-financing for Vietnam amounted to $4.4 billion for two investment projects. The ADB and IMF staffs coordinate through ad hoc information exchange information on policy matters.

Table 2.Technical Assistance by Sector, December 2017
SectorNumber of ProjectsIn millions of U.S. DollarsIn percentage of Total
Agriculture and Natural Resources5852.017%
Education2214.65%
Energy4335.611%
Finance3722.07%
Health and Social Protection169.43%
Industry and Trade812.64%
Multi-sector23.21%
Public Sector Management6847.415%
Transport and ICT3667.122%
Water and Other Municipal Infrastructure and Services3046.715%
Total320310.6100%
Source: Asian Development Bank
Source: Asian Development Bank
Table 3.Loan by Sector, December 2017
SectorNumber of LoansIn Million of U.S. DollarsIn Percentage of Total
Agriculture and Natural Resources372,064.713%
Education17913.06%
Energy132,578.717%
Finance14762.05%
Health and Social Protection9423.23%
Industry and Trade6159.51%
Multisector7280.02%
Public Sector Management191,779.112%
Transport and ICT364,854.131%
Water and Other Municipal Infrastructure and Services201,636.311%
Total17815,450.6100%
Source: Asian Development Bank
Source: Asian Development Bank
Table 4.Grants by Sector, December 2017
SectorNumber of GrantsIn Million of U.S. DollarsIn Percentage of Total
Agriculture and Natural Resources1362.219%
Education22.81%
Energy13.01%
Finance11.50%
Health and Social Protection958.618%
multi-sector315.05%
Transport and ICT4172.452%
Water and Other Municipal Infrastructure and Services614.04%
Total39329.5100%
Source: Asian Development Bank
Source: Asian Development Bank

Statistical Issues

(As of May 1, 2018)

Assessment of Data Adequacy for Surveillance

General: Data provision has some shortcomings, but is broadly adequate for surveillance. Most affected areas are financial sector, national accounts, government finance, and external sector statistics.

National accounts: The General Statistics Office (GSO) provides quarterly (cumulative) and annual data on GDP by type of economic activity and by expenditure (both in current and constant prices), and monthly and annual data on external trade, industrial output, retail sales, and prices. Successive STA technical assistance missions in December 2016 and August 2017 recommended that the GSO prioritize improving the Quarterly National Accounts (QNA) statistics. The GSO produces cumulative QNA estimates for the first three quarters of the year and the fourth quarter estimate is a residual. Instead, the GSO should compile discrete and independent quarterly GDP, using consistent data sources and methods. The data collection practices and coordination between data collection agencies could be strengthened and the compilation of national and provincial estimates should be centralized at GSO. The National Accounts base year is 2010 and, under the 2011–2020 Statistics Department Strategy, Vietnam plans to implement the 2008 SNA by 2020.

Prices statistics: The CPI methodology is broadly in line with international standards. The GSO recently implemented the rental equivalence approach for the treatment of owner occupied housing although the sample of rentals could be rotated on an annual basis and there is a need to improve the weights for owner occupied housing during the next CPI update in 2019. Price collection for the CPI could also be expanded to include more days throughout the month to better reflect price changes for the reference period. Monthly producer and trade price indices are published quarterly. The GSO has begun work towards compiling residential property price indexes and will receive STA technical assistance under the new D4D (Data for Decisions) project.

Government finance statistics: Government operations data reflect the consolidated operations of the state budget, which cover all four levels of government (central, provincial, district, and commune). However, data exclude quasi fiscal activities of the central bank (and state-owned enterprises (SOEs)), and extra-budgetary funds, among which are the Social Security Fund, Enterprise Restructuring Fund, Development Assistance Fund, Export Support Fund, local development funds, and the Sinking Fund (for repayment of on-lent funds), for which data are not compiled/disseminated on a regular basis. Compilation is on a cash basis for final annual data, but varies for provisional data depending on their source. As a result, government financing data, in particular domestic bank financing, cannot be reconciled as reported in the fiscal and monetary accounts. The World Bank and the IMF have recommended improving the coverage of fiscal data and aligning definitions with the GFSM 2014. The authorities expect to provide GFSM 2014 consistent data starting in 2018.

Monetary statistics: The State Bank of Vietnam (SBV) reports monetary data for the central bank and other depository corporations to the IMF’s Statistics Department (STA) with monthly periodicity, using old report forms with very limited information. STA has encouraged the SBV to develop a reporting scheme providing a comprehensive breakdown of data by counterparties and by currency of transaction, which will facilitate the migration to the standardized report forms.

External sector statistics: Balance of payments statistics rely on limited source data, resulting in gaps in several areas of the external accounts (current, capital, and financial). Starting from 2013 data, the authorities are reporting balance of payments in BPM6 format, however timeliness of the data remains an issue. Recent STA TA work via TAOLAM was focusing on improving data quality on foreign direct investment, development of international investment position (IIP) and external debt. The following observations and recommendations from previous STA TA missions remain: (i) the available resources are not sufficient to ensure effective implementation of an International Transaction Reporting System; (ii) FDI survey should be conducted annually and incorporated into compilation; (iii) further improvements are still needed in the treatment of goods for processing in line with BPM6, improvement of remittances estimates, and further study on unrecorded trade in gold; (iv) there is a need to address significant errors and omissions in the balance of payments, which could be related to changes in household holdings of foreign exchange in cash; (v) international reserves transactions need to be distinguished from valuation changes; (vi) improve timeliness and dissemination format of external sector statistics, including IIP.

Financial Soundness Indicators: Vietnam reports 10 of the 12 core financial soundness indicators (FSIs), 7 of the 13 encouraged FSIs for deposit takers, and one FSI for real estate markets with semiannual frequency for posting on the IMF’s FSI website. Data are reported with lag of more than two quarters.

Data Standards and Quality

Vietnam became a participant in the General Data Dissemination System (GDDS) in September 2003, which was superseded by the enhanced GDDS (e-GDDS) in 2015. An STA mission visited Vietnam in April 2016 and assisted the authorities to develop a National Summary Data Page (NSDP) in preparation for the e-GDDS implementation. The mission recommended that Vietnam adopt a strategy to make progress through the e-GDDS thresholds toward the Special Data Dissemination Standard (SDDS). No data ROSC are available.

Reporting to STA

Currently, no government finance statistics (GFS) are reported for publication in the IMF’s Government Finance Statistics Yearbook (GSY) or International Financial Statistics (IFS). Annual GFS data through 2004, excluding extra-budgetary funds and social security funds, based on the 1986 GFS format, have been reported for publication in the GFSY. No sub-annual fiscal data have been reported for publication in IFS since 2001.

Table of Common Indicators Required for Surveillance(As of May 7, 2018)
Date of Latest ObservationDate ReceivedFrequency of Data1Frequency of Reporting1Frequency of Publication1
Exchange RatesApril 20185/1/18DDD
International Reserve Assets and Reserve Liabilities of the Monetary Authorities2Feb. 20184/11/18MMN/A
Reserve/Base MoneyFeb. 20185/4/2018MMN/A
Broad MoneyFeb. 20185/4/2018MMN/A
Central Bank Balance SheetFeb. 20185/4/2018MMN/A
Consolidated Balance Sheet of the Banking SystemFeb. 20185/4/2018MMN/A
Interest Rates3April. 20185/1/18DDN/A
Consumer Price IndexFeb. 20183/9/18MMM
Revenue, Expenditure, Balance and Composition of Financing4—General Government5Dec. 2017Mar. 2018QQQ
Stocks of Central Government and Central Government-Guaranteed Debt6Dec. 2017Apr. 2018AAA
External Current Account BalanceQ4 20173/6/18QQQ
Exports and Imports of Goods and Services7Feb. 20183/14/18MMM
GDP/GNPQ1 20184/10/17QQQ
Gross External Debt2017Apr. 2018AAA
International Investment Position8N/AN/AN/A

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); and Not Available (N/A).

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency, but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra-budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Services data available on an annual basis.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); and Not Available (N/A).

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency, but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra-budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Services data available on an annual basis.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

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