Vietnam and the IMF Country's Policy Intentions Documents Free Email Notification Receive emails when we post new items of interest to you. Subscribe or Modify your profile

Socialist Republic of Vietnam—Letter of Intent, Supplementary Memorandum of Economic and Financial Policies, Technical Memorandum of Understanding Hanoi, November 7, 2001 The following item is a Letter of Intent of the government of Vietnam, which describes the policies that Vietnam intends to implement in the context of its request for financial support from the IMF. The document, which is the property of Vietnam, is being made available on the IMF website by agreement with the member as a service to users of the IMF website. Mr. Horst Köhler Managing Director International Monetary Fund Washington, D.C. 20431 U.S.A. Dear Mr. Köhler: On April 13, 2001, the Executive Board of the IMF approved a three-year arrangement for Vietnam under the Poverty Reduction and Growth Facility (PRGF). The purpose of this letter is to inform you on the progress in implementing the first-year economic program, and to request the second loan disbursement following the completion of the first review under the arrangement. The attached Memorandum of Economic and Financial Policies (MEFP) supplements the MEFP of March 14, 2001, and sets out the objectives and polices that the Government of Vietnam intends to pursue during the remainder of 2001 and the first half of 2002. Vietnam's economic performance in 2001 has been positive, despite the adverse effects of the global economic slowdown. Macroeconomic policies have been prudent and progress has been made in the key structural areas. As a result, the program targets for the first PRGF review have been achieved for the most part. The Government of Vietnam believes that the policies it intends to implement in the period through June 2002, as described in the MEFP, will build on this favorable performance, help sustain economic growth and reduce poverty, and cushion the economy in an uncertain external environment. On this basis, it requests completion of the first review under the arrangement; waivers for the nonobservance of the end-June 2001 performance criteria on bank credit to state-owned enterprises (SOEs) and on net international reserves and of the end-September structural performance criterion on bank audits, taking into account the nature of the nonobservance; and modification of the end-December performance criteria on bank credit to SOEs.

The government believes that the policies and measures set forth in the MEFP are adequate to achieve the objectives of the program supported by the PRGF arrangement, but will take further measures if deemed necessary. During the remaining period of the arrangement, Vietnam will continue to consult with the Managing Director on the adoption of measures that may be appropriate, at the initiative of the government or whenever the Managing Director requests such a consultation. The government will continue to provide the IMF with such information as it requires to assess Vietnam's progress in implementing the economic and financial policies under the program. The government intends to make these understandings public and authorizes the IMF to provide this letter and the attached memorandum to all interested parties that so request them, including through the IMF's external website. We can assure you that the Government of Vietnam is determined to fully implement the program, and we hope we can count on the continued support of the IMF in our endeavors. Sincerely yours, /s/ Le Due Thuy Governor State Bank of Vietnam       Supplementary Memorandum on Economic and Financial Policies of the Government of Vietnam for September 2001-June 2002 November 7, 2001 I. Introduction 1. Vietnam's ongoing medium-term economic program is being supported by a three-year arrangement under the Poverty Reduction and Growth Facility (PRGF). Consistent with the goals set out in our Memorandum on Economic and Financial Policies (MEFP) dated March 14, 2001, this supplementary memorandum reviews the implementation of the program so far in 2001 and sets out our policies for the remainder of the first program year through June 2002. II. Overall Progress so far in 2001 2. Economic performance has been encouraging and in line with the program, notwithstanding the global downturn. Overall economic activity has been bolstered by domestic demand, notably a revival of investment reflecting improved business sentiment. Inflation remains in check, owing mainly to restrained fiscal and credit policies, and the external position is satisfactory despite weakening demand. With exports slowing more than envisaged, real GDP growth for the year is estimated by the IMF staff to be in the range of 4½-5 percent, marginally below that programmed. Nonetheless, the targets for end-2001 for inflation (under 5 percent) and gross international reserves (US$3.6 billion) remain achievable (Table 1). 3. Macroeconomic policy implementation has been largely on track, and all but two of the performance criteria for end-June have been met. The fiscal stance so far in 2001 has been more cautious than programmed. In the first half of 2001, revenue was performing well across all categories, whereas spending for structural reforms and for capital projects fell short of targets, reflecting the slow pace of implementation. As a result, domestic bank financing has been avoided and the programmed limits on bank credit to government have been met comfortably. Credit policy has been restrained. By end-June, credit growth slowed to 29 percent, close to the programmed 28 percent, thanks to a firm stance on State Bank of Vietnam (SBV) refinancing and, since May, on the domestic base lending rate, as well as tight dong liquidity (Table 2). As a result, the end-June program limit on net domestic assets (NDA) of the banking system was met. However, the performance criterion on bank credit to SOEs was missed, owing to bank credit to support farm prices for coffee and rice, in order to ease the impact on farmers of a slump in world commodity prices. The exchange rate has been allowed to depreciate by 3½ percent since May 2001, and the surrender requirement was reduced in May from 50 to 40 percent. Net international reserves (NIR) have been broadly on track since then, even though the performance criterion for end-June was marginally missed owing to the delayed disbursement of the PRSC. 4. Progress on the structural front has been uneven, and we are taking action to redress the slippages so far. Trade policy initiatives have been more ambitious than programmed (Annex I). Under the five-year import and export regime (covering 2001-05) announced in April this year, the timetable for the removal of quantitative restrictions (QRs) for three of the six items covered under the PRGF understandings (steel, vegetable oil, and construction glass) has been advanced by one year to end-2001. Also, the timetable for QR removal on a subset of two additional items (automobiles and motorcycles) has been advanced to end-2002. Finally, in May 2001, QRs on five out of eleven items were removed ahead of schedule (alcohol, ceramic and granite tiles, clinker, paper, and 10-16 seat passenger vans). Implementation of the Enterprise Law has been effective in promoting private enterprises, and under the amended Foreign Investment Law, FDI is gradually reviving. However, reform of the state-owned commercial banks (SOCBs) is proceeding behind schedule. Finalization of the restructuring plans for three out of four large banks (Incombank, BIDV, and BARD) took longer than envisaged, as did the awarding of contracts for audits on international standards (IAS) for Vietcombank and Incombank. State-owned enterprise (SOE) reform has been slow. As of end August 2001, 93 SOEs have been equitized, compared with the target of 450-500 equitizations set for 2001 under our three-year plan. III. Macroeconomic framework and policies for September 2001-June 2002 5. We remain committed to implementing the reform strategy supported by the PRGF arrangement and believe that, notwithstanding weakness in Vietnam's external environment, the program's medium-term macroeconomic framework is broadly achievable. With a global upturn in 2002 and continued reform momentum in Vietnam, real GDP growth is targeted to rebound to 6-7 percent by 2003, and inflation to stay below 5 percent. The underlying external position for 2002-03 should continue to be sound, with the current account deficit in the financeable range of 2-4 percent of GDP and an increase in reserves to 9-10 weeks of import cover. Fiscal policy 6. In the fiscal area, the overall budget deficit (excluding onlending) in 2001 is being limited to 3 percent of GDP, close to the program target. Revenue, especially non-oil, is expected to perform better than envisaged, owing in part to improved VAT collection. Expenditure will rise on account of stepped up capital spending and, to a limited extent, the introduction of interest subsidies for farm price support loans and export promotion schemes. Such special support will be temporary, as the rural sector is being assisted mainly through capital spending in economic and social infrastructure. In particular, the share of social capital expenditure will rise to 38.5 percent of total capital spending. 7. A continued cautious framework will be adopted for the 2002 budget now under preparation, aimed at stabilizing public sector debt over the medium term. Based on conservative assumptions and in the face of an uncertain external outlook, revenue would be targeted at 20-21 percent of GDP, through a strengthening of revenue administration and measures to rationalize tax policy, drawing on IMF technical assistance. The VAT law is being revised to reduce the number of VAT rates and exemptions, to be made effective in the year 2003 budget. Expenditure would be kept at around 24½ percent of GDP. Emphasis will be given to restoring better balance between capital and current expenditure, and to spending on priority social sectors to help sustain activity and, as necessary, to support SOCB and SOE reforms. Poverty-reducing expenditures will be more closely monitored, and steps will be taken to further enhance the transparency and efficiency of government operations. The overall budget deficit, originally projected at 3 percent of GDP, is targeted to be in the range of 3-4 percent of GDP, and domestic financing will be capped at D 10-15 trillion (2-3 percent of GDP). Additional fiscal provisions for the capital costs of SOCB/SOE reforms are being finalized. These and the associated financing are in line with the government's preliminary estimates originally adopted under the PRGF, and will be reviewed periodically with the IMF staff. Monetary and external sector policies 8. In the monetary area, the priority will be to restrain credit growth to protect banks' asset quality while providing adequate credit for sustained growth. The monetary program now targets credit growth at around 10 percent in the first half of 2002. Moreover, the effectiveness of bank credit to SOEs will be further improved to strengthen their financial discipline. SBV refinancing will be limited to D 1.75 trillion for the first half of 2002, and greater reliance will be placed on indirect monetary instruments to achieve the credit program objectives. In addition, given the recent rise in foreign currency deposits (FCDs), the SBV will strive to strengthen credit risk management in banks, especially in SOCBs, and will closely supervise foreign currency loan operations and ensure the liquidity and quality of foreign assets held by banks, through tighter prudential regulations and reporting requirements in this area. In addition, the SBV will pursue appropriate interest rate and exchange rate policies to enhance confidence in the dong. 9. To this end, the government remains committed to a flexible exchange rate policy, and intervention in the exchange market will be limited to addressing disorderly conditions. Quarterly benchmarks for net international reserves have been set through June 2002, in line with the expected strengthening of the external position and maintenance of a flexible exchange rate policy. The surrender requirement will be further reduced, and will be phased out within the PRGF period. The two remaining exchange restrictions will also be removed well within the program period, so as to enable Vietnam to accept the obligations under Article VIII of the Fund's Articles of Agreement. 10. A prudent external debt management policy will continue. Government borrowing will remain mostly on concessional terms consistent with program limits, and government guarantees for nonconcessional debt contracted by SOEs will be kept within the program limits, with careful appraisal of project viability and the risk coverage confined to the minimum necessary. A. Key Structural Reforms Banking reform 11. In line with our banking reform strategy adopted under the PRGF-supported program, we will intensify efforts to restructure the four large SOCBs by: Implementing individual restructuring plans for all four banks, which have now been approved by the government and which are in line with the overall SOCB reform framework adopted under the PRGF. Implementing the operational guidelines for SOCB financial restructuring, which have also been approved by the government. These guidelines provide for financial incentives, through conditional recapitalization over three years, for banks to strengthen credit risk management. They also link debt relief to SOE restructuring. Under these guidelines, bank asset management companies will be endowed with sufficient power to seize and effectively dispose of collateral; and bank loan workout units will be equipped with sufficient mandate and leverage to work out appropriate forms of debt resolution, depending on the specific financial/operational conditions of the individual debtor. Completing IAS audits of Vietcombank by January 2002 and for the other three banks by December 2001, in order to allow a more realistic assessment of nonperforming loans (NPLs) and set a more transparent standard for monitoring these banks. Monitoring performance of banks against milestones that have been set for individual banks (in consultation with World Bank and IMF staff), consistent with the above guidelines and explicitly incorporated in an SBV directive. These milestones include targets for NPL recovery and for loan workout efforts. Meeting the March 2002 milestone for the resolution of at least D 1.4 trillion of potentially recoverable NPLs of the four large SOCBs is a structural performance criterion governing the third PRGF disbursement (Annex II), and satisfactory performance against the first-year milestones generally will trigger the initial phase of bank recapitalization. Making fully operational the unit that has recently been set up to oversee the implementation of SOCB reform (under the Interministerial Committee for SOCB financial restructuring), including the monitoring of performance against the above milestones. 12. As a key step for strengthening bank supervision, we will revise the criteria for loan classification under Decision 284 in accordance with international standards by end-2001. A timetable for moving provisioning onto the new classification standard within three years has also been set depending on funding sources outside of the banks. With respect to the joint-stock banks (JSBs), following closure/merger of seven banks so far (out of 48), further progress will be made to consolidate the system and strengthen the financial conditions of these banks, towards the aim of halving the number of banks through closure/merger. Private sector development and SOE reform 13. Promotion of the private sector is a priority. We are further strengthening the implementation of the Enterprise Law. Licensing requirements will be lifted for additional business subsectors, a decree on small and medium-sized enterprises (SMEs) is being adopted, and the Land Law is expected to be amended in October. A decree transforming wholly state-owned enterprises into limited liability companies operating exclusively under the Enterprise Law has also been approved. Furthermore, a decree was issued in August to promote FDI, entailing provisions for phasing out the dual pricing system and for further streamlining the licensing and administrative procedures for foreign-invested enterprises. 14. We will take steps to accelerate SOE reform and strengthen the framework for equitization in order to achieve our three-year targets within the original timeframe adopted in April 2001. These include issuing implementation guidelines with respect to SOE debt resolution and safety nets for labor redundancies, providing the monitoring unit in the National Steering Committee for Enterprise Reform and Development (NSCERD) with enforcement power, and publishing a rephased three-year roadmap. Furthermore, to enhance the effectiveness and integrity of the equitization process, caps on shareholdings in equitized SOEs by individuals and legal entities will be removed at the latest by end-2001; and the responsibility for issuing, selling, and registering shares is also being removed from SOE management. Finally, the system to monitor debt and budget support of 200 large SOE debtors is being strengthened to ensure timely and accurate reporting from concerned SOEs, including amending the Ministry of Finance (MoF) decision in this area to clarify the quarterly reporting requirements and to introduce sanctions against late reporting. 15. Further trade reform measures are being taken in the remainder of 2001, in line with our trade reform roadmap. These include replacing QRs for three items (steel, vegetable oil, and construction glass) with tariffs, implementing the 2001 tariff reductions under AFTA, and auctioning at least at 25 percent of the garment export quota while continuing to improve the auction process. 16. We have begun work on a Comprehensive Poverty Reduction and Growth Strategy Paper (CPRGSP) to be completed by April 2002. The CPRGSP will lay out the broad policy agenda for tailoring international development goals to Vietnam's circumstances, and for linking these goals to policy actions. In addition, we have drawn up a plan for strengthening consultations and are seeking technical support from the international community for incorporating the social impact analysis of reform into the CPRGSP framework. IV. Program Monitoring And Policy Transparency 17. The government will undertake a number of prior actions ahead of the IMF Executive Board consideration of the first PRGF review, in order to keep the program on a solid footing (Table 3). Table 4 contains quantitative performance criteria for end-December 2001 and quantitative benchmarks for end-March and end-June 2002; structural policy undertakings are summarized in Table 3. A second review under the PRGF arrangement will be completed by April 2002, which will focus on the economic program for the second-year PRGF arrangement and progress in accelerating SOCB and SOE reforms. 18. To help strengthen program implementation, technical assistance will continue to be sought from the IMF in bank restructuring and supervision, tax policy and administration, and statistics. In particular, in the statistical system, we intend to take steps to address deficiencies identified by IMF staff, beginning in the national accounts area, and to make a timely decision on Vietnam's participation in the General Data Dissemination System. 19. We are committed to furthering policy transparency, building on recent progress. Additional information will be posted on the newly introduced website for the MoF, and websites for financial and economic information will be considered, including for the SBV. Publication of IMF staff reports for Vietnam will continue. In addition, in connection with the IMF's safeguards assessment for Vietnam, an external audit of the SBV's 2001 financial statements will be conducted by the state auditor for completion by June 2002. We plan to conduct this audit in accordance with international standards and to publish post-audit financial statements. Attachments Use the free Adobe Acrobat Reader to view Tables 1-4. Table 1 Vietnam: Medium-Term Macroeconomic Framework, 1999-2003 Table 2 Vietnam: Monetary Program, December 2000-June 2002 Table 3 Vietnam: Prior Actions for Completion of the First PRGF Review and Structural Benchmarks and Performance Criteria for First and Second PRGF Review Table 4 Vietnam: Quantitative Performance Criteria and Benchmarks Under the First-Year PRGF Program Through June 2002 Annexes Annex I Vietnam—Timetable for Removal of Quantitative Restrictions Annex II Vietnam—Milestones for State-Owned Commercial Banks in 2002 Annex III Vietnam—Technical Memorandum of Understanding Vietnam: Timetable for Removal of Quantitative Restrictions Item or Group   Target under PRGF   Revised Date Clinker and cement            Clinker   December 31, 2001   May 1, 2001    Cement   December 31, 2002   No change Construction white glass   December 31, 2002   December 31, 2001 Granite and ceramic tiles   December 31, 2002   May 1, 2001 Paper   2001   May 1, 2001 Remaining steel products   December 31, 2002   December 31, 2001 Vegetable oil   January 1, 2003   December 31, 2001           Alcohol   Not scheduled for removal   May 1, 2001 Motorcycles   Not scheduled for removal   December 31, 2002 Passenger vehicles            10-16 seats   Not scheduled for removal   May 1, 2001    Up to 9 seats   Not scheduled for removal   December 31, 2002 Vietnam—Milestones for State-Owned Commercial Banks in 2002 The "Milestones for SOCBs" listed below are the minimum conditions in the context of the PRGF review, as agreed by the SBV with the staffs of the International Monetary Fund and the World Bank, for the purpose of recapitalization of the four large state-owned commercial banks (SOCBs). Bank-specific milestones are expected to be developed consistent with these overall milestones and issued as a directive by the SBV. Milestones for end-March 2002: Establish credit risk management and internal audit committees (where they do not already exist) and submit to the SBV for review the manual of procedures for those committees, revised to incorporate improvements relevant to each SOCB's recent experience. Resolve at least VND 1.4 trillion of potentially recoverable NPLs of the four large SOCBs. Resolution targets for individual SOCBs will be agreed by the SBV and SOCBs and communicated to the World Bank and the International Monetary Fund. Milestones for end-June 2002: Agree audit qualifications from year 2000 audit that are to be eliminated by year-end and sign contracts for external audits for year 2001. Agree on September 2002 and March 2003 targets for loan resolution. Milestones for end-September 2002: Pass a special SBV examination of credit file documentation. (Examples of features to monitor are: inclusion of appropriate signatures on credit documents; centralization at headquarters of credit extensions throughout the branch network to a single borrower; existence of a cash flow analysis of borrowers, even for collateralized loans; existence of written government guarantees for directed lending; etc.) Resolve an amount of potentially recoverable NPLs that will be determined on the basis of revised Decisions 284 and 488. Milestones for end-December 2002: Complete year 2001 external audit, eliminating qualifications agreed in June. Future milestones will be specified on the basis of experience with the implementation of earlier milestones and developments in SOCB conditions. The SOCBs will continuously improve performance against these milestones over three years, in addition to meeting these first-year milestones. SOCBs will also phase in provisioning over three years, subject to availability of financing, following revised Decisions 284 and 488. Technical Notes and Definitions Related to the Milestones Potentially recoverable loans are defined as: all collateralized loans + commercial noncollateralized loans to active borrowers + directed loans to active borrowers. Potentially recoverable loans refer to NPLs as of an end-2000 base date. Loans are considered "resolved" under any of the following conditions: 1. For all collateralized loans - actions are taken to gain possession of collateral (e.g., a claim is made in court), and if possession is achieved, actions are taken to recover value (e.g., the collateral asset is successfully sold or put at auction, even if not successfully bid, or a notice of sale offer is made or a different kind of marketable asset for which the collateral asset was previously swapped is successfully sold), or 2. For collateralized loans to active borrowers and noncollateralized loans to active non-SOE borrowers - the loan is restructured, if the active borrower negotiates with the SOCB a restructuring of business operations to improve debt-servicing capability, or 3. For noncollateralized loans to active SOEs—the loan is restructured if an approved SOE restructuring plan with appropriate conditions exists or provisions are made against the loan after an active SOE is closed, or 4. For all loans—provisions are made against the loan, if they are matched by "independent" capital injections, i.e., sources other than the government, the IMF, or the World Bank. Vietnam—Technical Memorandum of Understanding November 1, 2001 1. This memorandum sets out (i) the definitions of quantitative performance criteria and benchmarks for the first-year PRGF-supported program (Table 4), and (ii) related reporting requirements to the Fund's Asia and Pacific Department (Table 5). I. Definitions 1 Item 1: Net domestic assets (NDA) of the banking system Defined as total liquidity minus net foreign assets of the banking system. Total liquidity is defined as the sum of dong liquidity (currency outside the banks, deposits, and deposit substitutes) and foreign currency deposits with the banking system; deposits are defined to exclude government deposits. Net foreign assets of the of the banking system are the sum of net foreign assets of the SBV and net foreign assets of the deposit money banks (DMBs). Net foreign assets of the DMBs are defined as foreign assets minus foreign liabilities. Foreign assets comprise gold, foreign currency holdings, and claims on nonresidents. Foreign liabilities comprise all liabilities to nonresidents. Item 2: Net claims on the government of the banking system Defined as the claims on government minus deposits of the government with the banking system. Claims comprise advances to the state budget, investment in government securities, and any other forms of credit to the state budget. Government securities will be measured at the transaction price. Repayments of government securities will exclude interest payments, either as coupon interest or the discount. Government onlending funds financed by ODA are excluded from government deposits. Item 3: Credit to the state-owned enterprises from the banking system Defined as the sum of all claims on the state-owned enterprises (SOEs) by the banking system. SOEs are defined as wholly state-owned enterprises. Item 4: Credit from the banking system and from the budget and budget support to the 200 targeted large SOEs Credit from the banking system will be derived and verified from Report Form 1 (Report on Debt Situation of the Enterprise) of the Ministry of Finance (MoF) Decision No. 47/2001/QD/BTC on Promulgating Criteria to Monitor State-Owned Enterprises with Large Debts (issued on May 25, 2001 and amended on September 21, 2001). Credit from the budget and budget support will also be derived and verified from Report Form 1. The list of targeted large SOEs is given in Table 6. Item 5: Contracting or guaranteeing of nonconcessional external debt by the government Defined as the sum of all new foreign currency loans or other external debt to nonresidents contracted or guaranteed by the central government (including the SBV), that have a grant element of less than 35 percent of the overall value of the loan's original principal. Local governments and agencies cannot contract external debt, and SOEs cannot guarantee such debt. This performance criterion applies not only to debt as defined below, but also to commitments contracted or guaranteed for which value has not been received. For the purpose of this memorandum, the term "debt" will be understood to mean a current, i.e., not contingent, liability, created under a contractual arrangement through the provision of value in the form of assets (including currency) or services, and which requires the obligor to make one or more payments in the form of assets (including currency) or services at some future point(s) in time; these payments will discharge the principal and/or interest liabilities incurred under the contract. Debts can take a number of forms, the primary ones being as follows: (i) loans, i.e., advances of money to obligor by the lender made on the basis of an undertaking that the obligor will repay the funds in the future (including deposits, bonds, debentures, commercial loans, and buyers' credits) and temporary exchanges of assets that are equivalent to fully collateralized loans under which the obligor is required to repay the funds, and usually pay interest, by repurchasing the collateral from the buyer in the future (such as repurchase agreements and official swap arrangements); (ii) suppliers' credits, i.e., contracts where the supplier permits the obligor to defer payments until some time after the date on which the goods are delivered or services are provided; and (iii) leases, i.e., arrangements under which property is provided which the lessee has the right to use for one or more specified period(s) of time that are usually shorter than the total expected service life of the property, while the lessor retains the title to the property. For the purpose of this memorandum, the debt is the present value (at the inception of the lease) of all lease payments expected to be made during the period of the agreement excluding those payments that cover the operation, repair, or maintenance of the property. Under the definition of debt set out above, arrears, penalties, and judicially awarded damages arising from the failure to make payment under a contractual obligation that constitutes debt are debt. Failure to make payment on an obligation that is not considered debt under this definition (e.g., payment on delivery) will not give rise to debt. The grant element is to be calculated by using the currency-specific discount rates reported by the OECD as Commercial Interest Reference Rates (CIRR) as of December 31, 2000; for maturities of less than 15 years, the grant element will be calculated based on six-month averages of the commercial interest rates, and for maturities of 15 years or longer, the grant element will be calculated based on 10-year averages. Maturity will be determined on the basis of the original loan contract. For maturities of up to one year, the ceiling will apply to the amount of the stock of foreign currency loans or other external debt to nonresidents contracted or guaranteed by the government or the SOCBs. Excluded from the limits are changes in indebtedness resulting from rescheduling operations (including the deferral of interest on commercial debt) and normal import related credits, and credits extended by the IMF. Debt falling within the limit of this definition shall be valued in U.S. dollars at the bilateral market exchange rate prevailing at the time the contract or guarantee becomes effective. Item 6: External payments arrears Defined as the stock of overdue payments (interest and principal payments) on short-term debt in convertible currencies with an original maturity of up to and including one year (spot, money market, letters of credit, and others) and medium- and long-term debt contracted or guaranteed by the government (including the SBV). The limit excludes those overdue payments that relate to debts which are subject to rescheduling or a stock-of-debt operation. As of end-December 2000, there were no reported external arrears, except for arrears totaling US$57.3 million with Algeria currently under negotiation. Item 7: Net official international reserves (NIR) Defined as foreign assets minus foreign liabilities of the SBV, expressed in U.S. dollars and valued at the program monitoring exchange rates (see Section II). Foreign assets comprise gold, foreign currency holdings, and claims on nonresidents. As such, these assets must be readily available, i.e. sellable at any time and free of any pledges or encumbrances, and directly and exclusively controlled by the SBV. These assets will exclude holdings of nonconvertible currencies, claims on nonresident financial institutions denominated in nonconvertible currencies, holdings of foreign exchange of government ministries, the foreign currency deposits of deposit money banks held at the SBV, assets to be resold under a swap arrangement or forward contract, and such other claims that are not readily available and/or are encumbered. Foreign liabilities are liabilities to nonresidents contracted by the SBV, including deposits of foreign governments, foreign central banks, foreign DMBs, and international organizations, irrespective of their maturity. They also include IMF purchases and disbursements. II. Program monitoring exchange rates 2. Foreign assets and liabilities and all other elements of the items defined above that are denominated in foreign currency will be valued at the program monitoring exchange rates, unless specified otherwise. Holdings in gold will be valued at Vietnamese dong (VND) 480,000 per Vietnamese chi (equivalent to 3.75 grams). Assets and liabilities denominated in SDRs, including the SDR value of gold holdings and assets and liabilities resulting from transactions with the IMF will be converted at the rate of US$1.302 per SDR. Assets and liabilities denominated in currencies other than the U.S. dollar will be converted into U.S. dollars at the market rates of the respective currencies prevailing on December 29, 2000, as published in International Financial Statistics (IFS). The U.S. dollar value of assets and liabilities will be converted into Vietnamese dong at the official rate of the SBV on December 29, 2000, which was VND 14,501 per U.S. dollar. III. Performance Criteria and Benchmarks 3. Performance criteria include Items 1 to 3 and 5 to 7 as defined above. For external payments arrears (Item 6), the performance criterion will be measured on a continuous basis throughout 2001 and first half of 2002. The other performance criteria will be measured on the last day of December 2001. Quantitative benchmarks include Items 1 to 5 and 7 as defined above. They will be measured on the last days of September 2001, as well as March and June 2002. IV. Monitoring and Reporting Requirements 4. For the purposes of program monitoring, the following information, including any revisions to historical data, will be provided by the SBV, unless specified otherwise, to the Asia and Pacific Department of the Fund, through the office of the Senior Resident Representative of the IMF in Vietnam, as set out in Table 5. Attachments Table 5. Vietnam: Monitoring and Reporting Requirements Table 6. Vietnam: List of 200 Large Debt State-Owned Enterprises in the Debt Monitoring System Under the First-Year PRGF-Supported Program 1 These definitions, except Items 4, 5, and 6, adhere to the existing classification schemes used for the monetary derivation tables of the State Bank of Vietnam (SBV) covering 89 credit institutions and the SBV, and the associated monetary survey tables. More specifically, the banking system is defined as the SBV and the deposit money banks (DMBs), which consist of six state-owned commercial banks (SOCBs), 46 joint stock banks, 4 joint venture banks, 26 foreign bank branches, 6 finance companies, and the Central People's Credit Fund.