US government owes $12b to Vietnam

07-Jun-2016 Intellasia | CafeF | 6:00 AM Print This Post

How much Vietnam lends to the US shows the strength of Vietnam, rather than the debt burden on the US government.

According to the US Treasury Department, Vietnam now holds $12 billion worth of US government bonds. The figure increased by 3.5 times from early 2012 to late 2014.

Vietnam is among the US’s 50 biggest creditors.

Thanks to its position as the major payment currency and a stable political regime, the US dollar has been considered the major currency for national reserves for many years.

The years from 2012 to 2014 were the time when Vietnam’s financial and monetary systems escaped from difficulties.

The inflation rate decreased from 18.1 percent to 1.9 percent, while the dong value stopped falling.

While the dong continued depreciating by 2 percent per annum against the US dollar, it appreciated sharply against other hard foreign currencies, including the euro and Japanese yen.

This, to some extent, caused difficulties to exporters because Vietnamese products became less competitive in prices in the world market.

The VN Index increased by 9.8 percent per annum on average.

Meanwhile, 2015 was a tough year as international capital left emerging markets for some reasons.

First, the US FED raised the prime interest rate. Second, the key countries among emerging markets led by China fell into difficulties.

At that time, Vietnam witnessed a trade deficit of $3.5 billion. This was one of the reasons that forced the State Bank to devalue the dong by 5 percent against the US dollar.

Why only $12 billion, if Vietnam’s forex reserves are estimated at $30 billion? Answering the question, analysts said the figure of $12 billion does not reflect the entire situation of Vietnam’s forex reserves. It only shows the volume of the US government bonds put in custody at banks in the US.

Vietnam’s remaining forex reserves could be in other forms as follows.

First, US government bonds with the terms of less than 10 years. There are no figures from the US Treasury.

Second, forex reserves not in dollars, but in other kinds of assets such as gold, the euro and Japanese yen.

Third, US government long-term bonds which Vietnam deposits in other countries.

The volume of US government bonds being held by Vietnam is not big, but not too small.

If considering the ratio of the bonds’ value on GDP, Vietnam stays below Thailand and the Philippines, but above Malaysia and Indonesia.

China, the second largest economy, holds $1.2 trillion worth of US government bonds. billion-to-vietnam.html


Category: Economy, Vietnam

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