The National Bank of Cambodia (NBC) has been praised by a senior World Bank (WB) official for its effective management of international reserves, which has been deemed to be in step with international standards of central banking institutional investment reserve management as well as a reflection of the stability of the Kingdom’s financial situation.
Philip Dongsoo Hong, senior financial officer and engagement manager of Reserve Advisory and Management Partnership (RAMP) at the WB Treasury, was speaking at a June 23 meeting with NBC deputy governor Sum Sannisith at the central bank’s headquarters.
Hong lauded the achievements made by the NBC’s International Reserve Management Team and hailed the central bank as a “model member” of the WB’s 70-member RAMP programme, according to an NBC press release issued after the meeting.
The former Bank of Korea (BoK) official complimented the NBC for its “modern and highly secure” investment management system underpinning trading transactions, risk management, settlement and registration. He claimed that this system complies with international standards of central banking institutional investment reserve management, the release said.
In turn, Sannisith expressed gratitude to the WB for helping to advance resource and investment management at the NBC, and asked the Washington-based multilateral lender to continue to work with the central bank to make further progress in that field, the release added.
The NBC reported that the Kingdom’s international reserves closed 2022 at $17.8 billion, or the equivalent to seven months of import cover, down from $20.3 billion and 8.1 months at end-2021.
Nonetheless, pundits argue that this is still high for a developing country given the global financial crisis, signalling positive levels of economic growth and momentum towards improving people’s living conditions.
In an interview with The Post earlier this year, Anthony Galliano, the group CEO of financial services firm Cambodian Investment Management Co Ltd, remarked that the Kingdom has kept a higher level of reserves “than what is generally mandated for developing countries, which places the country in a strong financial condition.
“This is especially prudent given increased sovereign borrowing by the Kingdom. A high level of foreign reserves reduces liquidity risk, avails short debt maturity, and facilitates lower interest rates. All very positive conditions for the recent issuance of sovereign debt,” he said.
He explained that developing countries “are generally shoring up their foreign currency reserves, on an unprecedented scale in recent years, as a consequence of rising energy prices, supply chain issues, and as a precaution and self-protection against a currency crisis”.
Galliano also brought up Sri Lanka’s recent debt default, noting that the South Asian island nation “is experiencing rampant inflation and currency depreciation, [in] a lesson learned again, among other variables, of inadequate foreign reserves, which dwindled by 99 per cent since 2019.
“Although the riel has weaken of late, it is still resilient, underpinned by the strongest the US dollar has been in two decades, partially due to the level foreign reserves. As a result, the riel has not suffered the depreciation other regional currencies have experienced,” he said.