Vietnam’s foreign exchange reserves have fallen short of the minimum amount required to guarantee import payments, an official said.

Vu Viet Ngoan, deputy head of the National Assembly’s Economic Committee, told Thanh Nien that international financial organizations have advised Vietnam to maintain its reserves at a level that can cover 10 to 12 weeks of imports.

Given last year’s import payments of US$84-85 billion, Vietnam will need a minimum of $20 billion in its reserves, Ngoan said. Although he did not provide a specific figure, Ngoan said the reserves at present are “lower than the requirement.”

One of the main reasons for the decline in forex reserves is the country’s huge trade deficit, he said.

The National Assembly is seeking to keep Vietnam’s trade deficit below 18 percent of its export revenues this year, with a goal of bringing the ratio down to 15 percent in the next few years, Ngoan said.

Vietnam’s trade deficit stayed relatively steady at $12.4 billion in 2010, as exports surged over imports, according to the General Statistics Office.

The memories of Vietnam war still lingers in the mind of many US Citizens. But since the completion of the Vietnam war in 1975, the United States and Vietnam had gone on very different economic paths. On one hand, the United States developed economically to be THE most powerful economy in the World, with China and Japan still a distance second. On the other hand, Vietnam had languished within the realms of third world country, with the country still amongst the poorest nation in Asia and within South-East Asia.

As a result, Vietnam is unable to stabilise its own currency and against the US Dollar, the Vietnam Dong had maintained a continuous slide. Currently, 1 US Dollar trades at 19,607.84 Vietnam Dong, or 1 Vietnam Dong compared against 0.000051 US Dollar. With uncertain political setup as well as slow infrastructure development within Vietnam, we forecast that the exchange rate between the Vietnam Dong and the US Dollar will continue to slide in the medium term, probably crossing the 20k milestone at 1 US Dollar = 20,000 Vietnam Dong in the later part of 2011.

While this might not impact the farmers in Vietnam, inflation is bound to set in for the middle class which imports products from United States or the rest of Asia. Already, Vietnam had already faced a 12.1% increase in average food prices in Year 2010. This is also expected to further increase in Year 2011. Lastly, it is interesting to monitor if the Vietnam Government will further devalue its own currency, which had already happened thrice within a space of a year, from Nov 2009 – Nov 2010. As a result of this constant devaluation, the Vietnam currency is already trading much lower against the US Dollar in the black market, where capital control is more lax and it is easier to trade the currency with more liquidity. So for the tourist looking to travel within South-East Asia, Vietnam is one of the cheapest destinations, next to Thailand and Cambodia. Time for the US Citizens to come back to Vietnam again, just for leisure of course.