Structure, criteria and investment quota of State foreign exchange reserves in Vietnam

Structure, criteria and investment quota of State foreign exchange reserves in Vietnam (Internet image) 

Regarding this matter, LawNet would like to answer as follows:

1. Structure, criteria and investment quota of State foreign exchange reserves in Vietnam

The structure, criteria and investment quota of State foreign exchange reserves in Vietnam according to Article 6 of Decree 50/2014/ND-CP are as follows:

- The State Bank regulates the structure, criteria and investment quota of State foreign exchange reserves, including:

+ Regulations on criteria and quota of investment applicable to the State foreign exchange reserves;

+ Regulations on investment structure applicable to the official foreign exchange reserves, including the investment of the foreign exchange reserve Fund and the investment structure of the exchange rate stabilization and gold market management Fund.

- Grounds for development of investment structure of foreign exchange reserve Fund:

+ Trend towards fluctuation of exchange rate, interest and gold price on international market;

+ Situation of investment in types of foreign currency and gold in international reserves of the countries in the world according to the International Monetary Fund.

- Grounds for development of structure of investment of the exchange rate stabilization and gold market management Fund.

+ Objectives of monetary policies and exchange rate and gold policies;

+ Situation of fluctuation of exchange rate and gold price on domestic and international foreign exchange market;

+ Situation of use of foreign currencies in payment of imports of goods and services and repayment of foreign debts of Vietnam;

+ Quota of foreign exchange of the exchange rate stabilization and gold market management Fund approved by the Prime Minister in each period;

- Grounds for development of criteria and quota of investment:

+ Scale of State foreign exchange reserves;

+ Forecast of situation of international financial markets and domestic foreign exchange market;

+ Rating system of prestigious credit rating organizations in the world.

- Every 6 months, and when necessary, the Governor of the State Bank shall decide to approve the structure, criteria and investment quota of State foreign exchange reserves and make a report to the Prime Minister and the Ministry of Finance for coordination;

2. Components of State foreign exchange reserves in Vietnam

Components of State foreign exchange reserves in Vietnam according to Article 4 of Decree 50/2014/ND-CP include:

- Foreign currencies, cash and deposits in foreign currencies abroad;

- Securities and other valuable papers in foreign currencies issued by the Government, foreign or international institutes;

- Special capital or reserve withdrawal rights at the International Monetary Fund.

- Gold managed by the State Bank

- Other types of State foreign exchange;

3. Operations of official management of foreign exchange reserves in Vietnam

According to Article 10 of Decree 50/2014/ND-CP, the State Bank carries out the official management of foreign exchange reserves through the following operations:

- Investment on international market;

- Intervention in domestic market;

- Implementation of operations of foreign exchange derivatives;

- Implementation of bilateral or multi-lateral currency swap agreements with the Central Banks and international financial institutions;

- Other operations of official management of foreign exchange reserves shall be decided by the Governor of the State Bank in each period;

4. Regulation on the purchase and sale of foreign currencies between official foreign exchange reserves and the State budget in Vietnam

Regulations on purchase and sale of foreign currencies between official foreign exchange reserves and the State budget in Vietnam according to Article 11 of Decree 50/2014/ND-CP are as follows:

- The Ministry of Finance is responsible for deposit all of the foreign currencies of the State Treasury at the State Bank;

- Annually, the Ministry of Finance shall submit the foreign currency quota which shall be retained with permission for regular expenditure of the State budget. On the basis of foreign currency quota retained with the permission of the Prime Minister, the Ministry of Finance shall sell all of the remaining foreign currencies for supplementation of official foreign exchange reserves;

- Annually, no later than March 31, the Ministry of Finance shall give a written notice to the State Bank of the detailed plan for quarterly sale of foreign currencies for supplementation of official foreign exchange reserves;

- Where the State Bank may not balance its foreign currencies for repayment of foreign debts of the Government and other demands for expenditure of foreign currencies of the State budget, the Ministry of Finance shall coordinate with the State Bank to prepare plans for balancing the sale of foreign currencies to the State budget;

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