Prime Minister Hun Sen says National Bank of Cambodia, which celebrated 30 years in operation Thursday, has weathered the global financial crisis
PRIME Minister Hun Sen said Thursday that Cambodia continued to increase its foreign exchange reserves to the end of August reaching a near-record high of US$2.522 billion, while beating analysts’ forecasts of a sharp drop for 2009.
Speaking at the 30th anniversary ceremony for the National Bank of Cambodia (NBC), which was re-established after the end of the Khmer Rouge regime, Hun Sen said forex reserves had climbed 21.48 percent so far this year.
“Despite Cambodia suffering from the global financial crisis, we have still been able to ensure international reserves,” the prime minister said during the event at Chaktomuk Theatre in Phnom Penh.
International Monetary Fund (IMF) data shows that reserves reached a record high of $2.594 billion in May after climbing steadily at the beginning of the year from $2.076 billion at the end of 2008, a figure quoted by Hun Sen Thursday.
“Today, the banking industry is growing both in scope and operations, attracting large foreign banks to open, and the amount of deposits and loans have consistently increased – this reflects confidence from the public in this industry,” he said, encouraging banks to list on the long-awaited Cambodian stock exchange.
The IMF’s country representative, John Nelmes, told the Australian Business Association of Cambodia in Phnom Penh last week that the Kingdom in August was allocated $108 million in Special Drawing Rights, an IMF international reserve asset. The NBC used the facility to increase forex reserves, Nelmes added.
The latest figures represent strong growth in forex reserves for 2009 contrary to forecasts made by international analysts, including the Economist Intelligence Unit (EIU) which as recently as June was predicting a steady decline this year to just over $2 billion by the end of December through to about $1.5 billion by the end of 2010. It based the assessment on falling foreign investment and repeated intervention by the government to strengthen the riel.
However, the EIU has since revised its forecast, predicting in September that forex reserves would reach $2.951 billion by year’s end with a slight decrease to $2.861 billion by the end of 2010. In its October outlook, the London-based organisation said reserves would climb again to $2.983 in 2011.
“But [the NBC’s] international reserves position remains precarious, and the [riel] has … resumed its depreciating trend,” the EIU said in its September outlook, referring to “heavy dollar selling” in August.
Following a consultation with the government last month, the IMF recommended in a statement that the government limit intervention in the riel rate – namely, selling US dollars for local currency, adding that such moves would limit volatility in the exchange rate.
This “would help protect international reserves, deepen the foreign exchange market, and allow the exchange rate to play a greater role in facilitating external adjustment”, the IMF statement said.
Meanwhile, in his speech Thursday, the prime minister rounded on international agencies, including the IMF, for what he termed an overly controlling approach to assistance to the Kingdom.
“It is said I was Vietnam’s puppet, but when Vietnam was in Cambodia, I was more independent,” he said referring to international agencies such as the World Bank and IMF.
“We welcome your assistance, but do not intervene or put pressure on us, or there is no need to help.”
ADDITIONAL REPORTING BY NATHAN GREEN