Vietnam's Government has added sources formulating the State foreignreserves, which is viewed as a good move to enrich the reserves andstrengthen the resilience of the economy.

In the newly issuedDecree No 50/2014/ND-CP on May 20 by the Government, additional sourcesare reserves that are bought by interests derived from the existingreserves investment, and those bought by interests of foreign depositsof the State Treasury and credit institutions.

The new regulation takes effect on July15, 2014.

Theother sources that formulate the state reserves remain unchanged. Inthe Decree No 86/1999/ND-CP of August 30, 1999, which is under effect atthe moment, the State foreign exchange reserves are formulated from thefollowing sources: the existing foreign exchange under the stateownership and the management by the State Bank; foreign exchange boughtfrom the state budget and from the domestic foreign currency and goldmarkets; foreign exchange from loans of foreign banks and internationalfinancial organisations; and foreign exchange from other sources.

TheState Bank of Vietnam reported to have received 10 billion USD in thefirst four months of 2014, raising the total foreign reserves to 35billion USD. The central bank's Governor Nguyen Van Binh also announcedin the Government's April meeting that if taking into account thepotential, the reserves probably amounted to 45 billion USD. Largerreserves are believed to help stabilise foreign exchange rates.

Inthe new decree, the State foreign exchange reserves for the first timeinclude special drawing rights at the International Monetary Fund. Othercomponents are almost similar but more specific. The reserves includeforeign currencies in cash, foreign currency on overseas depositaccounts; securities and other valuable papers in foreign currenciesissued by the government, foreign institutions; gold managed by theState Bank of Vietnam; and other sources of reserves of the state.

Currently,the state foreign exchange reserves contain foreign currencies in cash;foreign currency credit balance on overseas deposit accounts; bills andacknowledgments of foreign debts in foreign currencies; debt securitiesissued or guaranteed by the Government. It also contains foreign banks,international monetary organisations or banks; and internationalstandard gold and other kinds of foreign exchanges.

Under thenew decree, every six months or as and when required, the State Bank'sGovernor will review and decide structure, standards and cap for theState foreign reserves investment and then report to the PrimeMinister.-VNA