Vietnam pledges not to devalue currency in agreement with US Treasury
WASHINGTON, July 19 (Reuters) – Vietnam has pledged not to deliberately weaken its dong currency to gain an export advantage, reaching a deal with the U.S. Treasury to refrain from “competitive devaluation” and return its more transparent monetary and exchange rate policies.
The deal, announced in a joint statement by Treasury Secretary Janet Yellen and State Bank of Vietnam Governor Nguyen Thi Hong after a virtual meeting on Monday, follows months of US pressure on Vietnam on its monetary practices and the growing US trade surplus.
The Trump administration in its final weeks had declared Vietnam a currency manipulator and threatened to impose punitive tariffs on imports from Vietnam.
Vietnam, which has profited from the remoteness of US supply chains from China amid a tariff war, saw its merchandise trade surplus with the United States jump 25% in 2020 to 69.7 billion. dollars despite the COVID-19 pandemic. Vietnam is a growing source of US imports of furniture, electronics, computers and clothing.
In the joint statement, Vietnam confirmed its commitment under the rules of the International Monetary Fund “to avoid manipulating its exchange rate in order to prevent an effective balance of payments adjustment or to gain an unfair competitive advantage and s ‘will refrain from any competitive devaluation of the Vietnamese dong’.
The Vietnamese central bank said the objective of its monetary policy framework was “to promote macroeconomic stability and control inflation.”
But the central bank agreed to “improve the flexibility of the exchange rate over time”, allowing the dong to follow developments in the country’s markets and economic fundamentals, and to further modernize and make its policy more transparent. monetary and its exchange rate framework.
The Treasury said it would notify other U.S. government agencies of the deal to address U.S. concerns.
“I believe that the attention paid by the State Bank of Vietnam to these issues over time will not only address the concerns of the Treasury, but also support the future development of Vietnamese financial markets and strengthen its macroeconomic and financial resilience,” Yellen said in the statement.
The Treasury under Yellen in April removed a label of Vietnam’s “currency manipulator” that was imposed by the Trump administration last December. But the Treasury said Vietnam, along with Taiwan and Switzerland, had exceeded its designation thresholds under a 2015 law. Read More
The department said at the time that it would start “an enhanced engagement” with Hanoi to correct the situation, which led Vietnam’s foreign exchange intervention and the global current account surplus to exceed 2% of its GDP.
US Trade Representative Katherine Tai said her agency would monitor Hanoi’s implementation of the deal and work with Vietnam “to ensure it addresses acts, policies and practices related to the assessment. of its currency which were found liable to prosecution in the Section 301 investigation “.
The USTR investigation found that Vietnam was taking “unreasonable” steps to lower the value of its currency in order to make its exports cheaper, but refrained from imposing tariffs.
Reporting by Lisa Lambert; Editing by Angus MacSwan and Andrea Ricci
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