Officials are keeping mum about the real inflation rate, but market surveys show rice prices have doubled and fuel, other costs are biting into earnings
A woman sifts rice at a market in Phnom Penh. The soaring price of rice is forcing local consumers to spend more.
INFLATION is running at a staggering 30 percent, experts say, with rice prices surging more than 100 percent since May 2007.
Prices for medium-grade rice (phkar khney) hit 3,100 riel per kilo in July, up from 1,700 at the same time last year, according to data provided by the Economic Institute of Cambodia (EIC), with other staple goods increasing at double-digit rates.
Inflation has been especially harmful to wage earners in the garment industry, which employs more than 300,000 workers.
Prices have generally risen faster for goods priced in riel than for goods priced in dollars.
Petrol prices were up 42.5 percent; fish 48 percent; beef 41 percent; pork 40.6 percent and chicken 57 percent in July 2008 compared to the same time last year, according to the EIC data.
"The price increases have been driven by high demand from India and China [for Cambodian products], and high fuel costs," said EIC president Chan Sophal.
High international demand for rice has inflated rice prices as Vietnam, Thailand and India struggle to fill international orders, he said.
Cambodia exported about two million tonnes of rice last year, worth about US$400 million. The Cambodian government slapped a ban on rice exports back on March 26. When the ban was revoked on May 26, prices took off before falling at harvest time.
"[Prices] have dropped slightly because of the high harvest, but they may rise again in early November. In that season, farmers start to stockpile because they know prices will rise," said Yang Saingkoma, president of CEDAC.
The Cambodian government has refused to release inflation statistics since February 2008, leading to accusations of political interference.
Even vietnam has released its inflation rate and it’s a
"Maybe they didn't want to reveal the data because of the national election," said Chan Sophal. "The government should not hide the inflation rate because the country will lack a clear basis for research.... Even Vietnam has released its inflation rate, and it's a communist country." Chan Sophal warned that failing to disclose inflation figures would only make investors wary.
"Investors, especially foreigners, will not understand our economy. Even banks need to know [the inflation rate] for setting interest rates," said Kang Chandararot, from the Cambodia Institute of Development Study. He urged the government to take action by subsidising gasoline and increasing the minimum wage for garment workers.
But Hang Chuon Naron, secretary general of the Ministry of Economics and Finance, said that the inflation estimates being circulated by local economists are too high.
"Farmers used to get only a litre of gasoline by selling 10kg of rice, but now it only costs 3kg. The price of rice has gone up faster than gasoline," Naron said.
He also said that the government was not to blame for the rising prices and that rising commodity prices were a global phenomenon.
He forecast lower rice prices over the next two harvests as supplies rise.
The government has also reduced liquidity in an effort to slow inflation by raising bank capital reserve requirements from eight to 16 percent in July, noted Chan Sophal.