Historical Sketch

In North Vietnam, a provisional government was established immediately after the retreat of the Japanese occupants, which successfully resisted the French attempt for re-colonization. The North Vietnamese state got internationally recognized only after the partition that followed the Geneva peace agreement after the French defeat of 1954. Between the mid-1960s and mid-1975s the Vietnam War opposed the two Vietnamese states, until finally North Vietnam defeated the south state. In 1976, both Vietnamese states merged into the Socialist Republic of Vietnam.

Monetary History Overview

The provisional government of North Vietnam began issuing distinct coins and paper money already in November 1945. The 1st North Vietnamese Dong was nominally on par with the Indochinese Piastre at par but effectively substituted it as the money supply dwindled during the war of independence. In 1948, an attempt at creating a gold currency "Viet" was made but the North Vietnamese state lacked the means to implement it. In May 1951, the National Bank of Vietnam began operations as central bank and decreed an exchange of the circulating money. The currency got re-denominated by cutting one zero, and the 2nd North Vietnamese Dong became the new unit. The withdrawal of the former paper money was ordered in June 1953, the nominally invalidated notes seem to have been tolerated at a reduced rate afterwards. The official partition of Vietnam in 1954 did not change the monetary situation in the north state. With the end of the warfare and the resulting political and economic isolation, the Dong saw some foreign exchange. By end 1956, a peg to the Chinese Yuan got established. In February 1959, a currency reform was carried out. Three zeros were cut, and the 3rd North Vietnamese Dong became the new unit. In late 1961, also the central bank was reconstituted and modernized. The Dong re-pegged to the Soviet Ruble reform, and the rate remained frozen throughout the Vietnam War. In April 1975, North Vietnam conquered the South, and mid-1976, the countries merged. The monetary unification was carried out in May 1978. In preparation, a currency reform was done in South Vietnam in September 1975, and in September 1976, both Vietnamese currencies re-pegged to the IMF Special Drawing Rights (SDR) and had a fixed ratio of 1 South Vietnamese Dong equals 1.25 North Vietnamese Dong.

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