According to the International Monetary Fund (IMF), the VND/US$ exchange rate was 14,157/US$1 in 2000, and VND15,965/US$1 in 2006, which meant that the VND devaluated by 2.02% per year.

With the devaluation of the local currency, export companies surely get high profit when exporting goods abroad, while importers have been suffering.

Vietnam exported $14.455bil worth of goods in 2000 and $39.826bil in 2006 (the annual growth rate was 18.40% per annum). However, if calculating the export turnover in VND, the figures were VND204,639bil and VND635,822bil respectively, and the growth rate was 20.8% per annum.

The big gap between the export growth rates with the two calculation methods meant the huge profit of VND72.005bil enterprises could get thanks to the VND devaluation (if converting into 2000’s price, the $39.826bil in export turnover of 2006 was equal to VND563,816bil).

As for imports, the total import turnover was $15.639bil and $44.891bil in 2006 (up by 19.21% per annum). If calculating the import turnover in VND, the figures were VND221,401bil and VND716,684bil respectively, and the growth rate was 21.62% per annum

This meant the loss of VND81,166bil that Vietnamese enterprises suffered in 2006 due to the exchange rate fluctuation (if converting into 2000’s price, the $44,891bil in import turnover was equal to VND635.521bil).

While the greenback keeps devaluating in the world’s market, it keeps revaluating in Vietnam. According to IMF, the US’ inflation rates were 2.2%, 2.4$, 1.7%, 2.1%, 2.8%, 3% and 2.9% respectively in the last seven years.

A high volume of US dollars has been inflowing into Vietnam through different channels (foreign direct investment, indirect investment, overseas remittance). Experts used the word ‘dollar indigestion’ to describe the excess of the dollar banks are facing. Once again, experts question if Vietnam should maintain the weak VND policy.

With the import material prices rocketing and the current high trade deficit, it is clear that the benefit Vietnam can get from exports is lower than the loss it suffers from imports. The devaluation of the VND will worsen the high inflation as it can ‘magnify’ the ‘material price fever’ on the world’s market.

Source: Tuoi tre.