Cambodia is set to release a new 30,000-riel banknote to commemorate the 30th anniversary of the 1991 Paris Peace Agreements, signed on October 23, and the return of the late King Father Norodom Sihanouk to the Kingdom after spending most of the two decades prior in exile.
Sub-Decree No 200, signed by Prime Minister Hun Sen on October 18, permits the production, issue and circulation, and provides for the legal tender status of the commemorative notes.
Economists point out that the circulation of the new note will have limited bearing on the local economy, and that the move does not necessarily mean that the central bank will print more money than needed. Others claim that the move will promote the use of the local currency.
Royal Academy of Cambodia economics researcher Ky Sereyvath affirmed that the new banknotes would merely replace notes of other denominations that would have been printed otherwise.
He told The Post on October 18 that the creation of the new banknote coincides with Cambodia’s tightening grip on coronavirus infections and plans to fully reopen in 2022.
Sereyvath does not ascribe to the view that the move would support greater use of the local currency in the long-term, commenting that Cambodians would likely prefer a $10 bill to a hypothetical 40,000 riel note, given a 4,000 riel to the dollar exchange rate.
However, he believes that the novelty effect will buoy demand for the banknotes and may lead to a marked increase in the supply of riel in the near-term, potentially resulting in a slight depreciation against the greenback, which could in turn be moderated by an uptick in demand for the local currency.
In this sense, he described the 30,000 riel note as a “monetary policy tool of the Royal Government”.
Asian Vision Institute economic analyst Chheng Kimlong maintained that the new addition would not lead to a change in the amount of riel in circulation, or have any major negative effects on the economy.
He noted that, to his knowledge, the government has no immediate plans to increase the volume of riel in circulation, noting that the move would in theory have both positive and negative effects on the economy.
While Kimlong did not dismiss the possibility of a 40,000-riel note for commemorative purposes in the future, he argued that the government would lean towards denominations that would not lead to a one-to-one equivalence with USD bills, pointing out that exchange rates change daily.