The central bank should not devalue the Vietnamese dong to support exports, but rather introduce supportive lending and trade promotion, wrote Tran Hoang Ngan, a member of the National Advisory Council on Monetary Policies.

“The State Bank needs to study measures to fight corporate hoarding of US dollars, leaning toward a forex conversion measure that would mean buying between 50-80 percent of businesses’ forex,” the report, published on Wednesday, said.

Ngan’s council, headed by former central bank governor Le Duc Thuy, advises the government on financial and monetary policies. Vietnam last had the foreign exchange conversion rule in place in 2002 when its foreign currency reserves were thin.

Last week, Prime Minister Nguyen Tan Dung ordered seven big state-run firms to sell dollars to help ease a dollar shortage as part of efforts to shore up the dong after a one-off devaluation of 5.2 percent in November.

Foreign currency inflows have declined due to lower foreign direct investment and remittances, as well as falling export and tourism revenue.

Total foreign reserves excluding gold dropped 21.3 percent to $18.8 billion as of August from $23.89 billion at the end of last year, the International Monetary Fund has said.

The exact, up-to-date figure for foreign reserves is considered a state secret in Vietnam and is not promptly or regularly made public.

Ngan urged the central bank to seek National Assembly approval next year to abolish the ceiling rate mechanism that caps lending rates at 1.5 times the benchmark base rate, which stands at 8 percent.

The official 2010 economic growth target of 6.5 percent required a flexible monetary policy that was in line with market movements, he said.