Cablegate: Vietnam and the Imf Enter a New Phase

This record is a partial extract of the original cable. The full text of the original cable is not available.

130946Z Apr 04

UNCLAS HANOI 001016

SIPDIS

SENSITIVE

STATE FOR E, EB, and EAP
STATE PASS USTR FOR EBRYAN
STATE ALSO PASS USAID ANE AFERRARA and DMCCLUSKEY
TREASURY FOR OASIA
USDOC FOR 4431/MAC/IFP/OKSA/HPPHO
BANGKOK FOR USAID

E.O. 12958: N/A
TAGS: EFIN ECON VM
SUBJECT: VIETNAM AND THE IMF ENTER A NEW PHASE

SENSITIVE BUT UNCLASSIFIED - PLEASE HANDLE ACCORDINGLY.

1. (U) IMF Resident Rep confirmed to Econ/C April 13 that
the GVN and IMF had agreed to allow their three-year loan
arrangement under the Poverty Reduction and Growth Facility
(PRGF) to expire on April 12. Agreed in 2001, the loan had
made available up to SDR 290 million to support the GVN's
development program from 2001-2004. Some SDR 124 million
was disbursed to Vietnam between April 2001 and June 2002,
she said. The IMF released a press statement --cleared in
advance with the GVN -- on this development on April 13.

2. (U) The rep went on to say that the IMF had been pleased
with Vietnam's growth and poverty reduction achievements
over the past decade and the strong economic performance of
recent years. However, disbursements under the PGRF had
been held up since late 2002 as the IMF sought agreement on
measures to enable the GVN to meet IMF general policy
regarding audit and accounting arrangements for central
banks of borrowing member countries. According to the rep,
the measures proposed by the IMF were not compatible with
GVN law. Thus, after many months of trying, the two sides
had finally agreed to allow the PGRF to expire without
additional disbursements.

3. (U) Despite the loan's expiration, the IMF remains fully
committed to continuing an effective partnership with the
GVN to support the implementation of the Comprehensive
Poverty Reduction and Growth Strategy. According to the
rep, the IMF will continue a regular policy dialogue with
the GVN through its resident office in Hanoi and periodic
missions as well as provide technical assistance and
training. Moreover, the IMF will continue to cooperate
closely with the multilateral development banks engaged in
Vietnam (e.g. World Bank and ADB) and contribute to the
broader policy dialogue between the GVN and the other donors
in the Consultative Group process, she said.

4. (SBU) Comment: As the rep noted, there was no way to
bridge the gap between the IMF's need to audit the books of
the State Bank (the central bank) and the GVN's inability to
allow this audit. The expiry of the loan provided a
convenient exit from the arrangement for both sides. This
amicable outcome was better than expected because it allows
the IMF to remain fully engaged (at GVN insistence), while
removing the major irritant in this key relationship. While
we would much prefer that Vietnam remain in compliance with
the IMF program, at least the IMF will remain on the scene
to offer guidance to the GVN on the macro side of the house.
BURGHARDT

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