Historical Sketch

The first Viet states emerged in the 10th century, but a state unification was achieved only in the 18th century under the Hau Le dynasty, to be completed by the Nguyen, which took power in 1802. The French conquest of the south began in 1859 and extended further north until 1883. The colonial power created the Kingdom of Annam which nominally remained under Nguyen rule, placed under French suzerainty. The colony of Cochin China in the south and the protectorate of Tonkin were placed under direct rule. In 1887, all French possessions were put under joint administration of French Indochina. During World War II, Vietnam was occupied by Japan, which formed a nominally independent state. After the Japanese defeat, France attempted to restore the colonial rule. However, communist rebels immediately proclaimed the Democratic Republic of Vietnam, which was not recognized internationally, and started the war of independence that ended with the French defeat of 1954. The peace agreement resulted in a partition of Vietnam into a communist north state and south state under Western influence. In the 1960s, the war broke out between North and South Vietnam, which ended with the North Vietnamese victory and conquest of the south in 1975. In the following year, the two Vietnamese states merged into the Socialist Republic of Vietnam.

Monetary History Overview

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. The introduction of the 1st Vietnamese Dong was done at short notice, and the population had only 6 hours to declare and register cash holdings. Amounts exceeding a threshold per household had to be deposited. Withdrawals were subject to conditions and generally difficult. The Dong was devalued by 75% in two steps, and in 1985, another currency reform was carried out. One zero was cut, and the 2nd Vietnamese Dong became the new unit. Once again, the exchange of banknotes had to be declared within 6 hours and was limited to maximum amounts per household. All exceeding cash holdings had to be deposited. No withdrawal procedure was ever defined so that the money was lost in the subsequent inflation. The new currency had a split exchange rate system with various commercial and non-commercial rates beside the almost inoperative official rate. Stepwise, the management of the floating commercial rates was reduced until in December 1989, all exchange restrictions were lifted. In 1991, the Dong began to stabilize, at that time its initial value had diminished by a factor of 800. Since the mid-1990s, the Vietnamese currency has been moderately depreciating only, with a surge after the Southeast Asian currency crisis of 1997, and even remained stable after the mid-2010s.

Unified Vietnam took over the South Vietnamese membership in the International Monetary Fund (IMF) of 21.09.1956.

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