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Central Bank Seeks To Promote Riel Use

Cam McGrath / Khmer Times Share:
Cambodia has one of the world’s most highly dollarized economies. KT Photo: Billy Otter

PHNOM PENH (Khmer Times) – Cambodia’s central bank is seeking to promote the use of the riel and wean the Kingdom’s economy off its dependence on the US dollar, a senior banking official said on Tuesday.

Speaking at a luncheon organized by the British Chamber of Commerce in Cambodia (BritCham), Chea Serey, director-general of the National Bank of Cambodia, said Cambodia’s high rate of dollarization presents both advantages and disadvantages. 

“Dollarization has been one of the factors that attracts many investors to Cambodia in the first place,” she said. “But it also limits the ability of the central bank to do its job…. We don’t have a lot of tools to deal with US dollars because we don’t print them.”

Ms. Serey explained that Cambodia’s high rate of dollarization limits the central bank’s ability to guide interest rates, maneuver its exchange rate policy or intervene in a crisis. 

The Kingdom’s dependence on the US dollar has grown over the last two decades, rising from 60 percent in the 1990s to about 85 percent today – the highest in Asia.

“A lot of us have already lost the notional value of our local currency,” Ms. Serey said, admitting: “I know a coffee costs me $2, but if I have to think 8,000 riels then I have to convert it.”

She said the preference of banks and their clients to conduct transactions in US dollars hampers the central bank’s efforts to guide interest rates, which keeps bank lending fees relatively high.

“To borrow cheaper from a bank, the bank must lend you local currency and you must want to borrow in local currency, and your operation must be willing to conduct business in local currency.”

She added that while the central bank is encouraging the use of the riel, it is not going to set a timeframe for de-dollarizing the economy. To do so would likely scare off investors.

“We have to promote more use of our local currency… and encourage businesses to list prices in riels,” she said. “But we’re not going to set a limit on when dollars [should be] out of the [economy.] We don’t want to create uncertainty or panic.”

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