International donors on Tuesday urged Vietnam to accelerate efforts to restructure its economy and warned the communist country to improve its rights record or risk jeopardising its economic success.

Vietnam, which earlier this year refocused its attention away from growth to stabilising the economy, is battling Asia's highest inflation rate of around 20 percent and urgently needs to push through economic reforms, donors said.

"It would be much easier for Vietnam to pursue its restructuring agenda now than have to restructure after it's hit by a crisis," said Victoria Kwakwa, World Bank country director for Vietnam, at the donors' meeting in Hanoi.

Since February, policy makers have been trying to stabilise an economy beset by multiple challenges including dwindling foreign reserves, a yawning trade deficit, downward pressure on the dong and runaway inflation.

The country needs to proceed with reform of the banking sector, privatise state-owned enterprises, simplify administrative procedures and do more to fight rampant corruption, donors said at the meeting.

The donors together pledged almost $7.4 billion in development aid for Vietnam for 2012, against the $7.9 billion they promised for 2011, Minister of Planning and Investment Bui Quang Vinh said at the end.

He described it as a "very positive" outcome given the difficulties facing some of Vietnam's top donors, which include Japan -- hit by a massive earthquake and tsunami in March -- and the EU which is mired in a debt crisis.

At the same time donors expressed "regret" at the state of the authoritarian country's democracy, warning that a poor human rights record could threaten economic progress.

A recent crackdown on dissidents undermines both Vietnam's international credibility on rights issues and its "long-term economic and social development", said Norwegian ambassador Stale Torstein Risa.

Dozens of peaceful political critics have been sentenced to long prison terms since Vietnam launched a crackdown on free expression in late 2009, according to Amnesty International.

Protests are rare in Vietnam but a handful of demonstrations have been organised this year on issues from territorial disputes with China to local land disputes with authorities. Some have been forcibly broken up by police.

"Peaceful expression of opinion should not be punished but rather encouraged", Risa said, adding that this was the view of many key donor nations such as Norway, Canada, New Zealand and Switzerland.

Vietnamese Prime Minister Nguyen Tan Dung said that the government respected people's right to freedom and democracy but warned that such rights "must be exercised within the framework of law and constitution".

The government was ready to open dialogue on these issues with its donors in order to "further mutual understanding," Dung said.