Vietnam govt reiterates need for flexible currency

HANOI, May 21 (Reuters) - The Vietnamese government has urged the central bank to allow a flexible exchange rate by allowing the dong VND= to move 2 percent up or down against the dollar, it said in a statement.

The central bank "must control the appreciation or the depreciation of the Vietnamese dong within +/- 2 percent," the statement issued late on Tuesday said, re-stating a policy first announced in early March.

"The government's instruction applies for the whole year while the central bank has not made any change to the current band," an official in the central bank's Foreign Exchange Management Department said.

On a daily basis, the central bank allows the dollar/dong exchange rate to move up or down 1 percent either side of an official rate announced daily.

It widened the band on March 10 to up or down 1 percent from up or down 0.75 percent.

The central bank would be "maintaining the fixed exchange rate with a moderate downward crawl against the U.S. dollar in 2008-2009," economist Helen Qiao at Goldman Sachs in Hong Kong said in a report issued on Monday.

Annual inflation has jumped in Vietnam to more than 20 percent and the central bank has carried out a number of measures to tighten liquidity to try to stem the rise in prices.

Vietnam has said it wants to keep its credit growth this year at 30 percent with an economic expansion of 7 percent, after loans rose 54 percent last year, helping to fuel economic growth of 8.5 percent. (Reporting by Ho Binh Minh; editing by Neil Fullick)