Logo of Phnom Penh Post newspaper Phnom Penh Post - NBC sees increased confidence in riel after dollar buys in 2017

NBC sees increased confidence in riel after dollar buys in 2017

A woman arranges Cambodian riel at an exchange shop in Phnom Penh.
A woman arranges Cambodian riel at an exchange shop in Phnom Penh. Pha Lina

NBC sees increased confidence in riel after dollar buys in 2017

The central bank injected $915 million worth of riel into the economy last year by buying up US dollars with the local currency, stabilising the exchange rate amid higher demand for riel, according to the bank’s latest report.

The National Bank of Cambodia’s (NBC) annual report, released yesterday, said the bank purchased US dollars 125 times in 2017 at an average exchange rate of 4,050 riel for $1.

Chea Serey, the NBC’s director-general, said the $915 million total for 2017 was 11.4 percent higher than 2016, reflecting an increase in overall confidence in the use of the local currency.

She added that 54 percent of the additional riel in circulation had been absorbed by commercial banks, while the rest went to money changers.

“[The greater injection of riel] reflects the increasing demand of riel in the market, which has paralleled the economy’s growth,” she said during the NBC’s annual meeting yesterday.

In July, Serey noted that the riel’s market share was still dwarfed in a heavily dollarised economy, in which the US dollar comprises 83 percent of currency in circulation.

The central bank predicts in its annual report that its exchange of riel for dollars will reach $1.02 billion this year, amounting to another 12 percent increase. Nevertheless, the riel is still projected to slightly appreciate, to about 4,037 riel per $1 in 2018.

Sean Thorninn, a lecturer in economics at the University of Cambodia and an expert in Cambodia’s financial landscape, said tax reforms had contributed significantly to the increasing demand for riel as taxpayers were required to fulfil their obligations in the local currency.

“Overall, it is a good sign of the central bank’s performance as well as the acceleration of local currency consumption,” he said.

However, the central bank continued to be hamstrung by the highly dollarised economy, which limited its policy options to the purchase of dollars and to changes in reserve requirements, Thorninn added.

Further measure to encourage the adoption of riel could include requirements to pay utility bills in riel and to list prices in riel, he said.

“Once the circulation of our currency in the economy gets bigger, then the central bank will be able to implement many other monetary policies more efficiency,” he said.

So Phonnary, vice president of Acleda Bank, said the riel’s circulation in the economy would further expand as financial operators worked to comply with NBC regulations requiring at least 10 percent of their total outstanding loans to be in riel by the end of 2019.

“More and more financial institutions are increasing their loans in Khmer riel to comply with the NBC’s regulation,” she said, adding that only 5 percent of Acleda’s outlanding loans were in riel. “The consumption of riel in the market will increase very strongly in the next few years.”

MOST VIEWED

  • South Korea’s first lady brings hope to ill boy

    South Korea’s first lady Kim Keon-hee – wife of current president of the Republic of Korea, Yoon Suk Yeol – met with a 14-year-boy with congenital heart disease during her trip to the Kingdom for the ASEAN Summit. After their meeting it was announced that the

  • Hun Sen gets Covid, shuns G20, APEC summits

    Prime Minister Hun Sen said he has tested positive for Covid-19 in Indonesia, where he is slated to attend the G20 summit in his capacity of the ASEAN chair. In a social media post addressing the Cambodian public, he said: “Before leaving Cambodia, I always

  • Moody’s sets outlook rating to ‘negative’ for Cambodia

    US global rating agency Moody’s Investors Service Inc on November 15 announced that it downgraded Cambodia’s outlook from “stable” to “negative” and maintained its B2 local and foreign currency issuer ratings. “The negative outlook reflects a deteriorating external position as illustrated by the severe

  • Hun Sen’s Covid infection caused by ‘weakened antibody’ after summit

    Prime Minister Hun Sen said exhaustion from heavy workload before and during the recent ASEAN Summit may have led to him contracting Covid-19 due to his weakened immune system, while rejecting speculations that the infection was caused by leaders of some countries who did not

  • Korean first lady paves way for ill boy’s surgery

    A 14-year-old boy with congenital heart disease who was lucky enough to meet with South Korean first lady Kim Keon-hee may get the chance of a lifetime and receive surgery and treatment at Asan Medical Center in Seoul, South Korea. After seeing his plight, many

  • Kingdom’s rice crowned world’s No1

    Cambodia’s Phka Rumduol jasmine variety has been crowned the World’s Best Rice for the fifth time at the TRT (The Rice Trader) World Rice Conference in Phuket, Thailand on November 17, according to leaders of the Kingdom’s apex rice industry body. Phka Rumduol