06 Principles of formulation of the balance of payments in Vietnam

06 Principles of formulation of the balance of payments in Vietnam (Internet image)

1. What is balance of international payments of Vietnam?

According to Clause 2, Article 3 of Decree 16/2014/ND-CP, Balance of international payments of Vietnam (below referred to as balance of payments) means general statistical report on transactions between residents and non-residents over a given period.

2. 06 Principles of formulation of the balance of payments in Vietnam

Specifically, in Article 8 of Decree 16/2014/ND-CP, the establishment of balance of payments is based on the following principles:

(1)The balance of payments is formulated in conformity with international practices of making balance of payments statistics and practical conditions of Vietnam.

(2) The currency unit used for formulation of the balance of payments is the U.S. dollar (USD).

(3) The exchange rate for conversion of Vietnam dong (VND) into USD is the average inter-bank exchange rate announced by the State Bank at the end of a reporting period.

(4) The conversion of foreign currencies other than USD into USD is as follows:

- Converting a foreign currency into VND at the cross rate between VND and such foreign currency announced by the State Bank for calculation of import duty and export duty applicable in the reporting period;

- After the conversion of a foreign currency into VND, the conversion into USD is conducted at the exchange rate specified in Clause 3 of Article 8 of Decree 16/2014/ND-CP.

(5) The time of making statistics on transactions is the time of ownership transfer between residents and non-residents.

(6) The value of a transaction is determined on the market principle at the time of transaction.

3. Structure and principal contents of the balance of payments in Vietnam

According to Clause 1, Article 13 of Decree 16/2014/ND-CP, the balance of payments consists of the following principal items:

- Current account, which covers all transactions between residents and non-residents on goods, services, incomes of employees, incomes from investment and current transfer specified in Article 14, 15, 16 and 17 of Decree 16/2014/ND-CP;

- Capital account, which covers all transactions between residents and non-residents on capital transfer specified in Article 18 of Decree 16/2014/ND-CP and purchase and sale of non-financial and non-production assets of the governmental sector and private sector;

- Financial account, which covers all transactions between residents and non-residents on direct investment, indirect investment, financial derivative transactions, foreign loan borrowing and repayment, commercial credit, money and deposits specified in Articles 19, 20, 21, 22, 23 and 24 of Decree 16/2014/ND-CP;

- Errors and omissions, which means the difference between the total of the current account, capital account and financial account and the general balance of payments;

- General balance of payments, which is determined by a change in the State’s official foreign exchange reserve brought about by transactions in the reporting period.

4. Time limit for provision of information and data to the State Bank of Vietnam

- Time limit for provision of information and data for formulation and analysis of the balance of payments:

+ Information and data for formulation and analysis of quarterly balance of payments and adjusted data of the previous reporting periods (if any) shall be provided to the State Bank on the 30th of the first month of the quarter following the reporting quarter at the latest;

+ Information and data for formulation and analysis of the annual balance of payments and adjusted data of the previous reporting periods (if any) shall be provided to the State Bank on the 31st of January of the year following the reporting year at the latest.

- Time limit for provision of information and data for making balance of payments forecasts

Information and data for making annual balance of payments forecasts shall be provided to the State Bank on the 10th of September of the year preceding the year of forecast.

(Article 12 of Decree 16/2014/ND-CP)

Thanh Rin

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