International Economics - Historial Exchange Rate Regime of Asian Countries

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Historial Exchange Rate Regime of Asian Countries

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	Viet Nam

Untitled Document

Viet Nam

Viet Nam has two currency areas corresponding to the former North and South Viet Nam. They were the North Viet Nam Dong (VND) and the South Viet Nam Dong (SD) before 1978. On 3 May 1978, a uniform currency, the Viet Nam Dong (D) was introduced for the Socialist Republic of Viet Nam (unification in 1976).

The two currency areas did not have a common exchange control law. Before May 1975, all exchange trade regulations applying in the South had been repudiated and new regulation similar to that prevailing in the North had been progressively introduced. Exchange control was administrated by the State Bank (the Central Bank) in Hanoi for the North and its branch office in Ho Chi Minh City for the South.

Viet Nam adopted a multiple exchange rate system. The rates including:
1. Official Rate
2. Commercial Rate: Rate for the foreign trade purposes, export receipts
3. Noncommercial Rate: Rate for the inward remittances and all other invisible transactions like tourism
4. Convertible Currency: Exchange rate for transactions with the convertible currency area
5. Effective Rate: A controlled, floating rate which linked to a basket of foreign currencies
6. Auction Fixing: Rate applied to all transactions

From 1954, the VND became the monetary unit of the Democratic Republic of Viet Nam. The Official Rate was aligned to U.S. Dollar. However, under the impact of Soviet currency reform in 1961, Dong was also aligned to the Ruble. Besides, a Commercial Rate was established for the external trade purposes.

Following the devaluation of U.S. Dollar, a controlled, floating Effective Rate for the North Viet Nam was set up in 1973. With the North Viet Nam conquest of South Viet Nam completed in 1975, VND and other foreign currencies were removed from circulation. In the following year, the North and South Viet Nam were unified and formed the Socialist Republic of Viet Nam. The dual currency structure still continued. But, the only transactions permitted between the two regions were officially authorized trade and travel.

In May 1978, a uniform currency called the Viet Nam Dong (D) was introduced. During 1978-1985, several rates were created. They were Effective Rates for Dong, Export Rate for the exchange for export proceeds of local corporations and Basic (Official) Rate.

Started from 1986, the Noncommercial Rate was divided into three categories: a) noncommercial rate from the nonconvertible area; b) noncommercial rate from the convertible area; and c) two special rates for the Ho Chi Minh City (premiums granted to inward remittances and to sales of foreign exchange to tourists)

In 1987, the Basic Rate was abolished as well as the export premium and import profits taxes. The rates between convertible and nonconvertible areas became indifferent

Up till 1989, the Commercial and Noncommercial Dong were merged and becoming the Convertible Currency Rate. This new rate governed all the transactions with the convertible currency area. But one year later, the Effective Rate replaced the Convertible Currency Rate. As the government moved toward a free-market economy, the SBVN arbitrarily set the exchange rate, often at only a fraction of the price on the black market, and the country's banks have largely followed the black market rate since 1989. But after the set up of the new foreign exchange centres, which opened in Ho Chi Minh City in August 1991 and Hanoi in November, the foreign exchange centres set the official rates. (FEER)

In 1991, another new rate called the Auction Fixing Rate replaced the Convertible Currency Rate for governing all transactions. In 1994, the interbank foreign exchange market began operation and the currency control was relaxed. The market permitted spot and forward transactions in six currencies and the authorities widened the fluctuation-trading band for the Dong in the interbank market. Besides, according to the decision making on 6 August 1998, the general director or directors of credit institutions were allowed to fix the spot buying and selling rates between the Dong and foreign currencies. (EAER)

On 25 February 1999, the SBVN announced that there would be only one Dong/U.S. Dollar exchange rate, which based on weighted average actual transaction rate in the interbank foreign currency market between Viet Nam Dong and U.S. Dollar. Based on this exchange rate, the commercial banks can set their own rate within a band of plus and minus 0.1%. Thus, the exchange rate system was reclassified as a crawling peg in 1999.

Major sources of reference include:
1) World Currency Yearbook (WCY)
2) IMF Annual Report on Exchange Arrangement and Exchange Restriction (IMF)
3) Vietnam: Vietnam Forex Control Mechanism Moves Dong towards Convertibility. Washington: East Asian Executive Reports, 15 Oct 1998. (EAER)
4) Out of the Black: Vietnam Moves Closer to Genuine Currency M. Hong Kong: Far Eastern Economic Review, 27 Feb 1992; Vol. 155, Iss. 8; pg. 54, 1 pgs. (FEER)

Date	Changes to the exchange rate regime	Viet Nam Dong per U.S. Dollar
20 July 1954	The North Viet Nam Dong (VND) became the monetary unit of the Democratic Republic of Viet Nam, replacing the Indochinese Piastre that was equal to 32 Dongs, thus creating a theoretical Official Rate of VND1120 per U.S. Dollar. (WCY 1984, p.814)
April 1958	Since the Dong depreciated in the previous years, the theoretical Official Rate has risen to VND3591 per U.S. Dollar by April 1958. (WCY 1984, p.814)
28 February 1959	A currency reform was decreed, and 1000 old Dongs were declared equal to one new Dong, establishing a new theoretical Official Rate of VND3.59 per U.S. Dollar. (WCY 1984, p.814)
1 January 1961	Under the impact of the Soviet currency reform, Hanoi's (the Capital of Viet Nam) unit was aligned to the Ruble at an exchange value of 3.27 Dongs, corresponding to a theoretical Official Rate of VND2.94 per U.S. Dollar. An effective Commercial Rate of VND3.60 per U.S. Dollar was established and linked to the Pound Sterling for foreign trade purposes. (WCY 1984, p.814)
18 November 1967	The Commercial Rate was devalued to VND3.75 per U.S. Dollar along with the Pound. There was a Noncommercial Rate for the Ruble Area (Noncommercial Ruble Rate) at VND1.92 per Ruble, or VND1.73 per U.S. Dollar, and a Noncommercial Rate for Capitalistic currencies at a theoretical value of VND4.20 per U.S. Dollar. (WCY 1984, p.814)
15 August 1971	Following the floating of the U.S. Dollar, the Official Dong depreciated parallel with the American unit. (WCY 1984, p.814)
18 December 1971	After the devaluation of U.S. Dollar on December 18th, the Official Rate was realigned to VND2.71 per U.S. Dollar (based on an unchanged gold content). The Commercial Rate (linked to Pound Sterling) was changed to VND3.31, and the Noncommercial Rate to VND3.87 per U.S. Dollar. The Noncommercial Ruble Rate remained VND1.92 per Ruble, but as a result of the new Ruble/Dollar parity, the rate was altered to VND1.58 per U.S. Dollar. (WCY 1984, p.814)
23 June 1972	With the floating of the Pound Sterling, the Commercial Rate for the Dong was abolished. (WCY 1984, p.814)
13 February 1973	Following the U.S. Dollar devaluation, Hanoi did not change the theoretical gold content of the Dong, thus realigning the Official Rate to VND2.44 per U.S. Dollar. The Noncommercial Dong was changed to VND3.48 per U.S. Dollar, and the Noncommercial Ruble Rate to the equivalent of VND1.43 per U.S. Dollar. (WCY 1984, p.814)
March 1973	A controlled, floating Effective Rate, linked to a basket of currencies, was established, with the Noncommercial Rate for the Capitalistic monies based on a 50% premium. (WCY 1984, p.814)
31 December 1974		2.900
30 April 1975	With the North Viet Nam conquest of South Viet Nam completed, the South Viet Nam Piastre (VN$) was kept as legal tender in the area. North Viet Nam Dongs as well as all other foreign currencies were removed from circulation. (WCY 1984, p.814)
22 September 1975	A currency reform was decreed for the conquered area, whereby 500 old South Viet Nam Piastre were exchanged for one new South Viet Nam Dong (SD) and issued by the Bank of Viet Nam, resulting in an Official Rate of SD1.51 per U.S. Dollar, which was announced on October 2nd. (WCY 1984, p.814)
31 December 1975		2.900
16 January 1976	The new South Viet Nam Dong devalued to SD1.85 per U.S. Dollar. (WCY 1984, p.814)
2 July 1976	North and South Viet Nam were officially united under the name of the Socialist Republic of Viet Nam. The dual currency structure was continued, but separated at the demarcation line located at the cities of Hue-Da Nang. The exchange rate established between the North Viet Nam Dong and the South Viet Nam Dong was ND1=SD0.8, and was applicable only to the authorized trade transactions and travel between the two regions. (WCY 1984, p.814)
September 1976	A controlled, floating Effective Rate for the South Viet Nam Dong was established with an exchange value of SD2.130857=SDR1. A Premium Rate for Capitalistic monies was also created, based on a 25% bonus for remittances from abroad of foreign currencies. (WCY 1984, p.815)
30 November 1976		2.680
December 1976	Soviet personnel created an additional Noncommercial Rate for the exchange of U.S. Dollar banknotes. (WCY 1984, p.815)
31 December 1977		2.460
3 May 1978	A uniform currency, the Viet Nam Dong (D) was introduced, with an Official Rate of D2.66358=SDR1, equivalent to D2.17=US$1. The conversion rate for the North Viet Nam Dong and the South Viet Nam Dong into new currency was ND1=D1 and SD0.80=D1, respectively. The State Bank of Viet Nam on the basis of the average rate of the respective currency vis-ÆÙj-vis quoted the SDR exchange rates of Dong for certain foreign currencies. All payments in convertible currencies were made at the Official Rate. (IMF 1979, p.445) In practice, the exchange rate between the Dong and the U.S. Dollar had been maintained within relatively narrow margins, while the rate for the SDR had been left to fluctuate (A controlled, floating Effective Rate for the new Viet Nam Dong). (IMF 1981, p.445) The 25% Premium Rate for the South Viet Nam Dong was abolished, while the Noncommercial Rate for the Capitalistic monies based on a 50% premium for the old North Viet Nam Dong was continued for the new Viet Nam Dong. (WCY 1984, p.815)	2.170
31 December 1979		2.190
5 November 1980	The Effective Rate for the new Viet Nam Dong was downgraded from D2.66358=SDR1 to D3.06459=SDR1. (WCY 1984, p.815)	2.390
6 July 1981	The Viet Nam Dong was cut to D10.37883=SDR1, resulting in an Effective Rate of D9.045 per U.S. Dollar. At the same time, the Noncommercial Rate was devalued and split into three categories. A 20% premium was applied to the exchange of convertible currencies by foreign visitors, resulting in a rate of D10.85 per U.S. Dollar, while a premium of 30% was applied to inward transfers up to D5000 and 40% for amounts above D5000, resulting in rates of D11.76 and D12.66 per U.S. Dollar, respectively. (WCY 1984, p.815)	9.050
11 August 1981	A Dollar-A Certificate was created for the purchase of goods in special government shops. (WCY 1984, p.815)
October 1981	An Export Rate of D12 per U.S. Dollar was created for exchange for export proceeds of local corporations. (WCY 1984, p.815) Viet Nam began to participate in the transferable values system since October 1st, the exchange rate for the Transferable Ruble had been fixed at D16.235=TR1 (Transferable Ruble). (IMF 1983, p.498)
5 November 1982	The Dollar-A Certificate system ceased to operate. (WCY 1985, p.898)
31 December 1982		9.760
1 September 1983	The 30%-40% premium for inward remittances was abandoned and a Preferential Rate of D20=US$1 was applied to inward remittances from Vietnamese workers in the nonconvertible area, while a rate of D60 per U.S. Dollar governed those from convertible area. (WCY 1986/87, p.542) Nonresident Vietnamese in convertible currency countries introduced a premium of 50% for inward remittances of convertible currencies to relatives. (IMF 1984, p.519)
31 December 1983		10.550
1984	The rate applied to inward remittances from the convertible area was devalued from D60 to D100 per U.S. Dollar. (WCY 1986/87, p.542)
31 December 1984		11.960
1 May 1985	The preferential exchange rate applied to inward remittances and transfer from the convertible area was devalued from D100 to D150 per U.S. Dollar. (IMF 1986, p.542)
14 September 1985	The State Bank of Viet Nam (SBVN) was authorized to issue new Viet Nam Dong and to withdraw old Dong from circulation. The value of the new currency was set equal to 10 times of the old Dongs. (IMF 1986, p.542)
15 September 1985	The Effective Rate was abolished and a Basic (Official) Rate of D15 per U.S. Dollar was established, as against a rate of D12.06=US$ for the old Dong. (IMF 1986, p.542) In addition, Commercial Rates existed, resulting from premiums on export earnings ranging from D35 to D50 per U.S. Dollar and from D30 to 100 per Ruble. There are also Noncommercial Rates of D20 per Ruble and D150 per U.S. Dollar for inward remittances from the nonconvertible area and convertible area, respectively. (WCY 1986/87, p.542) Premium Rate established for export receipts (Commercial Rate) of Central Import-Export Corporation.
31 December 1985		15.000
1 November 1986	A premium of 20% applied to inward remittances from convertible area and to sales of convertible foreign exchange by tourists and by international organizations based in Viet Nam. The Basic (Official) Rate for other transactions maintained at D15 per U.S. Dollar. In the municipality of Ho Chi Minh City, the corresponding rate was D18 per U.S. Dollar. For the nonconvertible area, a Noncommercial Rate was adjusted from D15 to D80 per U.S. Dollar primarily for inward remittances and tourism (invisible transactions). For the convertible area, a premium of 20% applied, the Noncommercial Rate was D96 per U.S. Dollar. (WCY 1986/87, p.542)
9 December 1986	In the municipality of Ho Chi Minh City, additional premiums were granted to inward remittances and to sales of foreign exchange to tourists, bringing the applicable exchange rate to D300 and D250 per U.S. Dollar, respectively. Commercial Rates result from export premiums of from D285 to D435 per U.S. Dollar, while import profits were taxed from D85 to D285 per U.S. Dollar. Similar premiums and taxes applied to transactions with the convertible area. (WCY 1986/87, p.542)
1987	The exchange rate system underwent simplification of sorts. The Basic Rate was abolished, as were the export premiums and import profits taxes. In addition, no distinction was to be made between convertible and nonconvertible areas. (WCY 1988/89, p.546)
21 April 1987	The Noncommercial Rate for inward remittances was devalued from D96 to D396 per U.S. Dollar. (WCY 1988/89, p.546)
21 July 1987	The Noncommercial Rate for inward remittances was devalued from D396 to D504 per U.S. Dollar. (WCY 1988/89, p.546)
15 October 1987	The Commercial Rate for external trade transactions was adjusted from D18 to D225 per U.S. Dollar and the Transferable Ruble Rate was changed from D18 to D150=TR1. (WCY 1988/89, p.546)
1 December 1987	The exchange rate for noncommercial transactions (including the transactions by international organizations) was adjusted from D80 to D368 per U.S. Dollar. (IMF 1988, p.517) The Clearing Ruble Rate was changed from D45 to D240 per Clearing Ruble. The 20% premium that had previously offered to tourists was abolished. (WCY 1990/93, p.552)
25 February 1988	The Noncommercial Rate for inward remittances was adjusted from D504 to D900 per U.S. Dollar. (WCY 1988/89, p.546)
15 September 1988	The Commercial Rate for external trade transactions was devaluated from D225 to D900 per U.S. Dollar. Thus unifying that exchange rate with the exchange rate for inward remittances. (IMF 1989, p.530)
10 November 1988	The Noncommercial Rate for all other invisibles transactions was changed from D368 to D2600 per U.S. Dollar. The Commercial Rate was split, with D900 per U.S. Dollar governing external trade within the foreign exchange plan, while for external trade outside the plan and for those of local enterprises, a rate of D2600 per U.S. Dollar applied. (WCY 1988/89, p.546)
10 December 1988	The Commercial rate for all other invisibles and for external trade outside the foreign exchange plan and for local enterprises was subsequently devalued from D2600 to D2800 per U.S. Dollar. (WCY 1988/89, p.546)
26 December 1988	The Commercial Rate for all other invisibles and for external trade outside the foreign exchange plan and for local enterprises was devalued from D2800 to D3000 per U.S. Dollar. (WCY 1988/89, p.546)
30 December 1988	The official exchange rate used for noncommercial transactions was D3000 per U.S. Dollar, and the Clearing Ruble Rate was D1080 per one Clearing Ruble.
19 January 1989	The rate for all other invisibles and for external trade outside the plan and for local enterprises was cut by 9% to D3300 per U.S. Dollar. (WCY 1988/89, p.546)
17 February 1989	The rate for all other invisibles and for external trade outside the plan and for local enterprises was cut by 6.1% to D3500 per U.S. Dollar. (WCY 1988/89, p.546)
5 March 1989	The exchange rates for the Transferable Ruble were devaluated from D700 to D1465 per Ruble for machinery and equipment, and to D2000 per Ruble from D1100 per Ruble for most other trade transactions. (IMF 1900, p.539)
13 March 1989	The previous system of multiple exchange rates applied to various transactions was abolished. The rate structure was unified. The Commercial Dong and Noncommercial Dong were merged and becoming the Convertible Currency Rate (exchange rate for transactions with the convertible currency area) at D4500 per U.S. Dollar, a devaluation of 22.2%. The Convertible Currency Rate would govern all transactions with the convertible currency area and was to be adjusted at irregular intervals based on developments in the domestic price of gold, internal commodity prices and international prices, while maintaining a spread with the parallel market within a range of 10% to 20%. Commercial banks could set the exchange rate for their transactions at up to 5% above the Convertible Currency Rate, keeping a 2% spread between the buying and selling rates. The Transferable Ruble Rate was devalued and split into two categories: for machinery and equipment D1465 per Transferable Ruble and for most other transactions D2000 per Transferable Ruble. (WCY 1990/93, p.553)
5 June 1989	The Convertible Currency Rate appreciated from D4500 per U.S. Dollar to D4200. (IMF 1990, p.539)
22 June 1989	The Convertible Currency Rate appreciated from D4200 per U.S. Dollar to D3900. (IMF 1990, p.539)
6 July 1989	The exchange rates for Transferable Ruble were revalued to D1190 from D1465 for machinery and equipment, and to D1500 from D2000 for most other transactions. (IMF 1990, p.539)
18 December 1989	The Convertible Currency Rate was depreciated from D3900 per U.S. Dollar to D4300. (IMF 1990, p.539)
31 December 1989		4,300.000
1990	The Convertible Rate was adjusted to D6500 per U.S. Dollar by the end of the year. (WCY 1990/93, p.553)
1 January 1990	The exchange rate for the U.S. Dollar was D4300 per U.S. Dollar. The exchange rate for Transferable Rubles (TR) for transaction with CMEA countries was adjusted from D1190 to D1400 per TR1 for machinery and equipment and from D1500 to D3430 per TR1 for most other trade transactions; the rate for most other trade transactions was an average of D1923 per TR1 for exports and D2370 per TR1 for imports. (IMF 1991, p.543)
31 December 1990	The system of settlements in Transferable Rubles with the members of the CMEA through the International Bank for Economic Cooperation was abolished and was replaced by a system of settlements in convertible currencies. (IMF 1991, p.543) The Transferable Ruble Rate was terminated and the Convertible Currency Rate became the Effective Rate at D6500 per U.S. Dollar, governing practically all transactions except the Clearing Varieties. (WCY 1990/93, p.553)	6,500.000
1 January 1991	During 1990, the official exchange rate in term of the U.S. Dollar was adjusted 5 times, and on 1 January 1991, the official exchange rate was D7000 per U.S. Dollar. (IMF 1991, p.541)
29 August 1991	During 1991, the Effective Rate of Dong was adjusted 9 times from D6500 per U.S. Dollar on January 1st to D8300 per U.S. Dollar on August 29th. (IMF 1992, p.530)
30 August 1991	In August, a new foreign exchange centre was established in Ho Chi Minh City. (FEER) Foreign exchange (only U.S. Dollar) was to be auctioned to banks, trade organization and to economic entities needing foreign exchange. The final (closing) rate at each trade session was the Auction Fixing Rate and was to be applicable to all transactions. All the commercial banks were required to buy at this rate and sell at a rate within a maximum margin of 0.5% of the fixing rate. (WCY 1990/93, p.553)
November 1991	In November, another foreign exchange centre was established in Hanoi. (FEER)
31 December 1991		11,900.000
21 October 1992	The daily depreciation rate of the maximum selling rate was increased from Mex$0.20 to Mex$0.40 per U.S. Dollar, while the minimum buying rate was to be held constant until the end of December 1993. (IMF 1993, p.333)
31 December 1992	An Official Rate of D9200 per U.S. Dollar existed at the end of 1992 for external aid valuation by the government. (WCY 1990/93, p.553)
1 July 1993	An official exchange rate, which had been used only for the valuation of external aid, was abolished. (IMF 1994, p.553)
14 October 1994	The interbank foreign exchange market began operation, permitting spot and forward transactions in 6 currencies. Trading might take place within trading ranges stipulated by the SBVN. (IMF 1995, p.533)
1 March 1997	The authorities widened the fluctuation-trading band for the Dong in the interbank market to 5% from 1%. (IMF 1998, p.971)
14 October 1997	The authorities widened the fluctuation-trading band for the Dong in the interbank market to 10% from 5%. (IMF 1998, p.971)
16 February 1998	The SBVN depreciated the official midpoint rate of the Dong against the U.S. Dollar by 5.6% to D11800 per U.S. Dollar. (IMF 1999, p.941)
6 August 1998	The general director or directors of credit institutions were allowed to fix the spot buying and selling rates between the Dong and foreign currencies. With respect to U.S. Dollar, the buying or selling rate fixed by such institutions must be within 0.1% of the average actual transaction rate in interbank foreign currency market of the previous transaction day. (EAER)
7 August 1998	The SBVN devalued the Dong's Central Rate by 10%. The Central Bank abolished the upper limit of the exchange rate band and established a "one-sided band" of 7%, instead of the previous band of plus and minus 10%. (IMF 1999, p.941)
25 February 1999	The SBVN quoted as Official Rate the daily average exchange rates of the interbank market of the previous business day. Based on this exchange rate, commercial banks set their own rate within a band of plus and minus 0.1%. Thus, the exchange rate system was reclassified as a crawling peg. (IMF 1999, p.941)