P OLITICAL uncertainty during May caused a big jump in the rate of inflation and
the flight of foreign currency deposits, according to the National Bank of
Cambodia's latest monthly economic bulletin.
The government's plan to
contain inflation to 10 percent this year has been knocked way off course by the
turbulence associated with the Khmer Rouge's April/May offensive which
threatened second city Battambang.
The Consumer Price Index shot up by
5.73 percent in May taking total inflation for the first five months of the year
up to 13.7 percent. The large increase follows a rise of 3.64 percent in April,
which was also attributed to political uncertainty.
The Khmer Rouge
recaptured their headquarters at Pailin in April in a big blow to the Royal
The report attributed 37 percent of the rise in the CPI in
May to higher rice prices, with some speculative hoarding.
in fighting led to the closure of the vital border crossing with Thailand at
Poipet-Aranyaprathet, choking off supply and causing prices to
Jittery depositors withdrew 31.9 percent of all foreign currency
held in the banking system during May, the report shows, causing a 34.4 percent
or 78 billion riel drop in money supply as measured by quasi money.
Overall money supply, which had been growing by an average of 7.5
percent during the first four months, fell by 19.3 percent in May, largely
because of the widespread withdrawals in foreign assets from the banking
The riel also softened further against the dollar during May,
losing 1.8 percent in value to reach 2,565 to the dollar.
followed a 1.6 percent loss in value by the riel in April. In contrast gold
prices went up by 0.9 percent to 115,000 riel per chi.
applauded the government for a further small fall in credit to the banking
system from 88 billion riel in April to 85 billion in May.
But there was
a huge deterioration in net foreign assets during May, from 266.5 to 185.3
billion riel, a fall of 30.4 percent, or 81 billion riel.
This was due to
foreign liabilities ballooning by 50 percent or 114 billion riel.
main factor behind this rise was the government borrowing from non-bank
institutions overseas, the report said. The increase in borrowing abroad was
partially offset by an increase of 33 billion riel in gross assets.