- By David BoscoDavid Bosco is a Foreign Policy contributing editor and assistant professor at American University's School of International Service. He is at work on a book about the International Criminal Court's first decade.
Vietnam risks becoming the biggest East Asian economy to seek an International Monetary Fund rescue loan since the region’s financial crisis more than a decade ago as it moves to support a faltering banking system.
The nation may need IMF aid to recapitalize banks and must act quickly to clean up bad debt or risk “prolonged stagnation,” the National Assembly’s economic committee said in a Sept. 4 report published on its website yesterday. The financial system needs an injection of 250 trillion dong ($12 billion) to 300 trillion dong, according to the 298-page report that included recommendations to address economic risks.
In July, the IMF released a mostly optimistic account of the Vietnamese economy that included upbeat language on government efforts to bolster the banking sector:
[T]he authorities have taken action to address vulnerabilities at a number of small weak banks. The nine banks classified as weak were placed under the special inspection, and required to present restructuring and recapitalization plans for approval by the SBV. The authorities have also adopted a comprehensive medium-term strategy to strengthen the financial sector as a whole.