Curbing Dollarization in Vietnam: A Complex Economic Challenge

“You get what you pay for,” the words of my truck driver friend in Hanoi echo in my ears whenever the topic of dollarization comes up. He says that with prices skyrocketing, customers are paying in US dollars to be safe, as the Vietnamese Dong continues to lose value. It’s disheartening to hear. So, what exactly is “curbing dollarization” and why does it seem so challenging?

Understanding the Issue: What is Dollarization?

Simply put, dollarization is the increasing use of the US dollar in an economy other than its own. It’s like we’re putting the US dollar on a pedestal, treating it as the “gold standard” for all economic activities. From pricing goods and services to calculating bank interest rates, even salaries and wages, everything is being converted to US dollars.

This phenomenon emerges as a “self-defense mechanism” for people facing economic instability. For instance, during economic crises, hyperinflation, or rapid price fluctuations, people fear the devaluation of their local currency and turn to the US dollar as a “life raft” to preserve their assets.

However, overusing this “remedy” can have severe side effects. When an economy becomes overly reliant on the US dollar, it loses control over its monetary policy and becomes vulnerable to external fluctuations, hindering macroeconomic management.

Pfurni Product Policy

The Arduous Journey: Curbing Dollarization

Like breaking a bad habit, curbing dollarization is a long and challenging process that requires concerted efforts from multiple stakeholders.

According to economist Nguyen Van A (lecturer at the National Economics University), to solve this complex problem, we need to focus on the following key solutions:

1. Stabilizing the Macroeconomy and Controlling Inflation: This is the prerequisite for strengthening people’s confidence in the local currency. When the economy is stable and inflation is under control, people will no longer fear the devaluation of the Dong, reducing the demand for US dollars.

2. Developing the Financial Market: A well-developed financial market will facilitate capital flow and minimize hoarding of foreign currency.

Controlling inflation in the economy

3. Enhancing State Management of Foreign Exchange: Stricter control over the buying and selling of foreign currency in the black market is necessary. Simultaneously, strengthening the inspection and supervision of foreign exchange transactions at credit institutions will prevent speculation and profiteering.

4. Raising Public Awareness: Educating the public about the harmful effects of dollarization and encouraging the use of the local currency in transactions will help build a strong defense against dollarization.

Policy on Banning Illegal Slaughter

Overcoming Challenges: Towards a Brighter Future

Curbing dollarization is a tough battle filled with difficulties and challenges. However, with the determination of the entire political system, the unity of the business community and the people, we can overcome this challenge and gradually steer the economy towards stable and sustainable development.

Do you have any stories about dollarization you’d like to share? Leave a comment below to join the discussion!

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