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With yen appreciation, Vietnam ODA debts rise   2010-10-04 - Thoi bao Kinh te Vietnam

The rapid appreciation of the yen recently has made Vietnam’s actual ODA (official development assistance loans) debt increase by 50 trillion dong, according to the Ministry of Planning and Investment (MPI).



The ministry warned of the increase in its August 2010 report and gave the exact figure in its September report for the Government’s regular meeting on September 30.


The too-sharp appreciation of the Japanese yen has raised concerns over Japan’s economic growth rate and the negative psychological effect on Japanese businesses.


On September 14, the yen traded at a record 82.88 per dollar, the highest in the last 15 years.


The Japanese government decided to intervene in the foreign exchange market by selling yen and purchasing dollars to curb the yen’s appreciation. On September 10, Tokyo approved a new economic stimulus package worth 915 billion yen ($10.9 billion) to deal with the yen’s appreciation against the dollar and risk of economic recession.


This was the first time since 2004 that the government made a strong intervention on the foreign exchange market, which led to a decrease of 85.93 per dollar.


According to MPI, the sharp appreciation of the yen has had a big impact on Vietnam.  Japan is one of Vietnam’s biggest trade partners, which now imports more from Vietnam than it exports. The yen appreciation brings even more advantages for Vietnam exports to Japan, while imports from Japan will become more expensive.


MPI believes that Vietnam needs to take full advantage of yen appreciation to boost exports, while it has also urged reasonable measures to control the trade deficit.


Economists also anticipate that Japanese investors will make outward investments. The expensive yen will allow them to save on expenses. Vietnam sees this as an opportunity, because it will help push up disbursement of foreign direct investment (FDI) capital.


Nevertheless, the yen increase will make Vietnam’s debts via ODA loans increase. Japan now leads in providing ODA to Vietnam, so the actual debts of Vietnam will increase considerably. Projects funded by commercial loans from Japan will also be influenced by the yen appreciation.


According to MPI, Japan has given ODA capital worth 1394 billion yen so far, which was equal to $14 billion in the past.  Now it has soared to $16.3 billion.  Converted to dong, the amount hit 304.5 trillion, up from 251 trillion.


MPI’s August report showed that the actual debt of Vietnam to Japan reached $15.7 billion. As such, the value of the debt rose sharply by nearly one billion dollars, or 11,359 billion dong, in just the last month.

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