The National Bank of Cambodia (NBC) has announced a $50 million auction this week to stabilise the local currency exchange rate in the market.
The NBC has informed banks, microfinance institutions (MFIs) and licensed money exchangers that the minimum rate for auction will be announced on the day of bidding.
Khou Vouthy, deputy director-general of the NBC, said that during the COVID-19 pandemic, the central bank has observed that most regional currencies fluctuated because of a slowdown in economic activity including Cambodia’s riel, which has depreciated slightly.
“In fact, the exchange rate of the riel against the US dollar in 2020 has changed differently from previous years. In order to contribute to improving the livelihoods of people, strengthening the purchasing power of the riel will contribute to maintaining its low price,” he said. “To aim for stability and to strengthen the macroeconomic situation, the NBC decided to intervene in the foreign exchange market by announcing a $50 million auction.
He said the US dollar auction will be attended by banks and financial institutions and money changers.
Say Sony, PRASAC MFI’s executive vice-president, said this intervention is good to stabilise the exchange rate. However, he said PRASAC will not join in this time, “because we have enough cash – both Khmer riels and US dollars”, he said.
The NBC and relevant ministries and institutions have continuously contributed to the ongoing improvement of the use of the riel, with demand for the notes increasing over the last 20 years by an average of 16 percent per annum, according to the NBC.
NBC’s Governor Chea Chanto said the growth in demand for the riel is mainly supported by an increase in public confidence following the Paris Peace Accords in 1991 and subsequent macroeconomic and financial stability.
He remarked at the 40th anniversary of the re-introduction of the riel held in Phnom Penh in late September that Cambodia needs a strong national currency to strengthen its economic and financial resilience to underlying crises, as well as to support sustainable and inclusive socio-economic growth and development.
He said, considering the importance of the riel in the economy since the early 2000s, the government has identified policies to promote the currency as a key priority in the financial sector development strategy. It seeks to move the banking and financial sector forward and strengthen economic resilience.
The NBC in May asked commercial banks and MFIs to send it the smallest US dollar banknotes because it considers them difficult to manage and “there is little demand for them”, giving them a three-month deadline (June 1 to Aug 31) to collect $1, $2 and $5 bills so it can sell them to a foreign country.