ABSTRACT
The continued rise of the rate of inflation and high budget and balance-of-payments deficits in 1986 had triggered a process of macroeconomic destabilization that put pressure on the government to act. The system of repressed inflation, which is typical of planned economies, had got out of control because prices in the markets ’outside the plan’ reacted directly to shortages and also had an indirect influence on official pricing. With a drastic restriction of the financing of the national budget by the State Bank, a fresh attempt to combat inflation began in 1990. In March 1989 Vietnam began to implement a macroeconomic program which, in its blend of domestic and foreign trade liberalization and monetary and fiscal stabilization, corresponded to the model of an IMF stabilization program in almost textbook fashion. The Vietnamese transformation policy was based on a blend of micro-economic liberalization and macroeconomic stabilization, which can certainly be described as abrupt for the period 1989-92.
