US embassy cable - 04HANOI1016

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