National Bank of Cambodia (NBC) deputy governor Chea Serey on June 15 reiterated a call for greater use of the local currency to bulk up and accelerate the Kingdom’s economy, in the midst of regional and global uncertainty, as central banks of major countries hike interest rates.
Serey made the plea during a seminar in western Kampong Thom province’s Stoung district focused on the Cambodian riel, financial literacy and Bakong system.
Central banks around the world have been raising interest rates to combat the global inflation crisis triggered by the Russo-Ukrainian conflict, in an effort to reduce borrowing, temper consumer demand, and relieve pressure on rising prices for goods and services, she said.
Widespread use of the local currency allows these central banks to alter their benchmark interest rates, she explained, lamenting the high levels of dollarisation in the Cambodian economy.
The NBC “would effectively be able to manage interest rates if the riel were widely used”, she stressed.
Countries all over the world have been reducing their reliance on the US dollar due to its volatility, she said, noting that for nations that hold significant amounts of the currency in their foreign exchange reserves, a depreciation of the greenback corresponds to a loss of national wealth.
Shifting Cambodia’s dependence from the US dollar to the local currency “will require the active participation of all stakeholders, both public and private”, Serey said.
At a March event in the capital, Royal University of Law and Economics (RULE) professor Srun Sopheak described the decades-long simultaneous use of the two currencies in Cambodia as a “special problem”, contending that a continued “dollar-denominated economy” could undermine the Kingdom’s sovereign right to make its own monetary policy decisions.
“Now may be the right time to promote the use of the riel on the government’s agenda, as Cambodia’s macroeconomic parameters show that the market is ready for the national currency to affirm its place as the primary means of payment,” he suggested.
NBC’s Serey shared that the quantity of Cambodian riel in circulation has risen from about 356 billion in 1998 to 14.1 trillion at end-2022, representing a compound annual growth rate (CAGR) of 16.6 per cent, which she said signals a steady increase in demand for the currency.
“Using our national currency is essential to enhancing the country’s economic resilience, preserving macroeconomic stability and promoting growth, particularly during times of crisis,” she said.