A RESUMPTION of multilateral project lending to Vietnam this year, as is now widely expected, could herald a return to the days of galloping inflation unless carefully managed, says a United Nations economist. Capping inflation has been one of the Vietnamese Government's prime objectives in its fight to make the economy more attractive to much-needed foreign investment. It is widely praised for its success in reining back inflation from 67.2 per cent in 1991 to a far more respectable 17.5 per cent last year. Vietnam is a member of the World Bank, International Monetary Fund (IMF) and Asian Development Bank (ADB), but all three have withheld loans to Hanoi since Washington extended its 1964 trade embargo on North Vietnam to cover the entire country in 1975. While nobody questions the desperate need for the resumption of development lending to carry out much-needed infrastructure improvements, the downside to their return has been widely overlooked. ''The most immediate impact of the resumption of lending will be the growth in domestic demand resulting from increased public expenditure,'' UN Development Programme Hanoi resident economist Raymond Mallon says. ''This needs to be managed carefully to avoid a resurgence of inflation,'' he told a seminar in Hongkong. ''There could be further increase in demand for the limited number of people with foreign language, trade, business and office management skills, as well as for international standard housing and other facilities. ''There will also be increased opportunities for foreign suppliers of services and materials. ''This may contribute to a mini-boom in the major cities, especially if foreign investment inflows continue to accelerate.'' Lending by the multilateral overseas development agencies is expected to be primarily used to finance the foreign exchange costs of importing products for development projects. Consequently, the resumption of lending would be followed by a sharp jump in imports and a widening of the trade and current account deficits, Mr Mallon told the seminar run by Investment Focus and the Far Eastern Economic Review. Since the introduction of Doi-Moi or ''renovation'' of the Vietnamese economy in 1986, Vietnam's economic circumstances have improved significantly and the country is now widely regarded as having the potential to become another Asian dragon. The government's economic, fiscal and monetary policies have gradually begun to overcome economic stagnation, and severe internal and external trade imbalances. Gross domestic product growth is rising and was 5.3 per cent in 1992. Other economic indicators have also recorded gains. Last year, exports grew 37 per cent, industrial production 8.5 per cent, agricultural production 3.5 per cent and foreign investment a staggering 73 per cent. The promotion of foreign investment has been a major objective of Vietnam since December 1987, when the Law on Foreign Investment was enacted. Washington has vowed to maintain its trade and economic embargo on Hanoi until it fully accounts for more than 2,200 US servicemen listed as missing or imprisoned during the Vietnam War. The last ADB loan to Vietnam was approved in 1974 for the Industrial Development Bank, five months before the communist north captured the US-backed south, triggering the US trade embargo. The ADB, along with the IMF and World Bank, are prepared to resume lending once US objections are lifted. US congressmen and leaders of military veterans' groups have been holding talks in Hanoi this week with Vietnamese officials, hoping to speed up the process of accounting for missing servicemen. Observers now expect the US to lift its objections to ADB, World Bank and IMF development lending by November, before a complete raising of its trade embargo. However, Mr Mallon warns: ''The rate of build-up in external assistance will have to be managed carefully to ensure that levels do not exceed the country's capacity to utilise overseas development aid resources effectively. ''Care will also be required to ensure that the country will be in a position to finance its increasing stock of debt, even if most of this debt is on highly concessional terms. ''Provided overseas development aid is used effectively, the resumption of multilateral lending should assist Vietnam in attracting the increased domestic and foreign commercial investment which will be needed to realise the high investment ratios which have been an important factor in achieving the high growth rates realised in most East and Southeast Asian economies in recent years. ''Increased commercial investment will be important in ensuring that recent improved economic growth rates can be sustained over the medium to long-term. ''It is unlikely that current growth rates can be sustained without substantially increased investment in physical and social infrastructure.''