* Six Vietnamese banks also downgraded on macro concerns
* "Stronger" monetary stance likely needed for inflation
* External payments crisis probably not imminent
(Adds context, details)
By John Ruwitch
HANOI, Dec 15 Moody's Investors Service
lowered Vietnam's bond rating on Wednesday, citing the
heightened risk of a balance of payments crisis, accelerating
inflation, a falling currency and debt distress from state
The agency also downgraded six Vietnamese banks, including
three that are partly owned by foreign lenders, on the same
set of concerns.
(For a Factbox on the banks click [ID:nHAN225113])
Vietnamese authorities have recently begun signaling a
shift away from a pure growth focus toward more balanced
economic policies in the face of double-digit inflation and a
steadily weakening dong .
Vietnam raised policy rates by 100 basis points in early
November, but Moody's suggested that was not enough.
"Moody's considers that short-comings in economic policies
have allowed pressures to remain unabated on the balance of
payments and are resulting in ongoing macroeconomic
instability," Tom Byrne, a senior vice president with Moody's
Sovereign Risk Group, said in a statement.
"An unwillingness to tighten effectively monetary policy
and to allow the exchange rate to depreciate in line with
market pressures have weakened the balance of payments and
have elevated the risk of an external payments crisis," he said.
Though a payments crisis was "probably not imminent", the
ratings agency said a "stronger" monetary policy stance was
likely needed to check inflation, which hit 11.1 percent in
November compared with the same month last year -- the highest
annual rate in 20 months.
Economists and government officials expect the full-year
consumer price index to be above 10 percent, compared with a
parliament-approved government target of 8 percent.
Inflation is just one of Vietnam's many macroeconomic
The dong has lost more than 7 percent against the U.S.
dollar on unofficial markets since the beginning of October,
under pressure from inflation, a chronic trade deficit, high
gold prices and intractably weak public confidence in the
The authorities said they would not devalue the dong
before Tet, or the Lunar New Year, which is in early February
this year, and would instead try to help meet dollar demand by
selectively tapping into foreign exchange reserves.
But the currency has remained weak, in part because
Vietnam does not have the reserves for an all-out defence of
Moody's said expectation of a weak dong and more inflation
had fuelled capital flight last year and appeared to be doing
the same this year.
The International Monetary Fund warned last week that
Vietnam needed further monetary tightening to bring the
foreign exchange market and inflation under control, and
called for fiscal consolidation.
Le Xuan Nghia, deputy director of the National Financial
Supervisory Commission, which oversees financial and monetary
policy and reports to the prime minister, agreed with some of
Moody's reasoning but said "crisis" was too strong a word to
use with regard to the balance of payments situation.
"Vietnam's BOP deficit was forecast to be $4 billion this
year, down from $8.8 billion in 2009. But we think it could be
around $2-2.5 billion this year, as exports may jump 25
percent from a target of 12 percent. I think Vietnam's BOP has
been basically improved," he told Reuters.
Moody's also cited debt distress at the near bankrupt
state-run Vietnam Shipbuilding Industry Group, or Vinashin.
The company, one of Vietnam's biggest state-owned firms,
has asked to delay a $60 million payment due to international
creditors next week and a senior economic official said
Vinashin was responsible for its own debts, suggesting that
the government would not intervene.
Moody's said the Vinashin's debt trouble "suggests a
reduced ability or capacity on the part of the government to
provide financial support to that, and perhaps other, large,
The trouble at Vinashin, which the government said was
some $4.4 billion in debt, was part of the reason behind the
downgrade on Wednesday of Asia Commercial Bank , Bank
for Investment and Development of Vietnam (BIDV), Military
Commercial Bank, Saigon Hanoi Bank , Technological &
Commercial Bank (Techcombank) and Vietnam International Bank
(VIB), Moody's said.
ACB is 15 percent owned by Standard Chartered Plc
, Techcombank is 20 percent owned by HSBC Holdings Plc
, and VIB 15 percent owned by Commonwealth
Bank of Australia .
The Moody's downgrades come at a sensitive time for
Vietnam with leaders of the ruling Communist Party meeting
this week ahead of a congress to anoint new leaders and set a
policy course for coming years.
(Additional reporting by Ngo Thi Ngoc Chau; Editing by Robert