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More oversight needed: NBC

Central bank deputy director general says promoting the riel is also a priority

SIEM REAP
STRENGTHENING bank supervision and promoting the riel are the main priorities for the central bank for 2010, National Bank of Cambodia (NBC) Deputy Director General Nguon Sokha said at a regional finance conference that finished Saturday in Siem Reap.

Following a difficult year in 2009 that started with tight liquidity and rising bad loans, Nguon Sokha said at the 45th annual Southeast Asian Central Banks (SEACEN) Governors Conference that the Kingdom had benefited from its location in the region that had recovered the quickest from the economic crisis that followed the collapse of Lehman Brothers in 2008.

“We hope to improve regional trade and diversify the economy in 2010,” she said. “We hope to have small positive growth in 2010. The medium-term outlook is positive.”

Cambodia’s economy is also in a good position due to excess liquidity, she added, and the property sector has largely avoided the fallout from real estate bubbles that plagued other countries during the crisis period.

Minister of Economy and Finance Keat Chhon said last month that there was US$900 million in excess liquidity in the banking sector as retail lenders continue to struggle to find sound borrowers in the wake of non-performing loan rates that hit an average 6 percent at the end of last year.

ANZ Royal alone has $200 million sitting idle in the central bank, CEO Stephen Higgins said last month.

“Confidence in the economy remains strong,” said Nguon Sokha during the conference. “Moving forward, the NBC and the government will work together to strengthen bank supervision and promote our local currency.”

The central bank’s expressed commitment to improved supervision comes after the International Monetary Fund (IMF) said in a December report that although the NBC has improved oversight through spot checks and other new measures, still more action is urgently needed.

IMF representatives, along with those from the Asian Development Bank, took part in the two-day Siem Reap meeting along with representatives from all ASEAN countries except Laos, which acted as an observer. South Korea, Taiwan, Sri Lanka, Nepal, Mongolia, Papua New Guinea and Fiji also sent representatives.

On the sidelines of closed-door meetings at the Sokha Angkor Resort, ADB Vice President Lawrence Greenwood said that discussions focused on strategies for exiting stimulus measures and low-interest rates that had been designed to spur recovery.

Cambodia has experienced flat month-on-month inflation in recent months as food prices remain depressed, but compared with the low bases at the start of last year, consumer price index inflation has started to pick up – in January, prices rose 6.9 percent from a year earlier compared with 5.3 percent in December.

Greenwood said the Kingdom’s economic prospects looked fairly rosy, adding that the ADB predicted a V-shaped recovery for all of developing Asia – including Cambodia – in 2010.

No concrete multilateral agreements were made at the event. But central bank delegates did vow to work together in their efforts to withdraw economic stimulus measures and set monetary policies, according to an NBC press release.

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