A top central bank official has urged enterprises, financial institutions and the general public to increase the use of the local currency and depend less on the US dollar, in remarks made to observe Riel Day.
National Bank of Cambodia (NBC) deputy governor Sum Sannisith made these comments on the 42nd Riel Day, observed on March 20 to commemorate the re-introduction of the riel in Cambodia.
Over the past 42 years, the presence of the riel has “contributed significantly” to the “restoration and building of economic and social sovereignty” through its role as a value scale, means of payment and in savings, Sannisith said, adding that “the riel has gone through many obstacles before becoming the confidence-inspiring currency it is today”.
These obstacles included the complete loss of confidence in the riel after the Pol Pot era and the subsequent political instability that plagued the Kingdom until the end of 1998, he said.
The economic crisis, which happened in parallel in the 1980s, also led to a sharp rise in inflation and a depreciation of the riel, giving rise to the widespread use of the US dollar in the Cambodian economy starting in the early 1990s that has continued to this day, he added.
Sannisith noted that the continued use of the US dollar amongst the Cambodian public means that “more involvement will be required in promoting the use of the riel by all stakeholders, including ministries, public and private institutions, companies, enterprises and the general public”.
The government and NBC have set out a policy to promote the use of the riel since the early 2000s, after the “macroeconomic situation” in the Kingdom had become more stable, he said.
“The implementation of these policies, combined with the participation of all stakeholders, has led to the volume of the riel in circulation increasing steadily, while the value of the riel has stabilised, which reflects the growing demand for the currency,” he added.
Sannisith said that because Cambodia and other countries continue to face uncertainty due to the ongoing Covid-19 crisis, the use of the riel by the banking sector has become more important in strengthening the resilience of the economy through the easing of interest rates, “to encourage investment and consumption, as well as in providing additional cash to the economy”.
Cambodia Microfinance Association (CMA) secretary-general Phal Vandy said that the association requires all members to provide loans to customers in riel where possible, currently at the minimum rate of 10 per cent as set by NBC.
He added that at present, all members of the association have provided loans in riel “in the region of 20 per cent, exceeding the limit set by NBC – which reflects their active participation in promoting the riel as the national currency”.
“The vision of the association is that we want to increase the riel portion of the loan to between 30-50 per cent,” Vandy said.
“But this requires the participation of the public, which is an important factor apart from the efforts of member institutions of the NBC to promote the regular use of the riel.”