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Govt inflation goal on track

Govt inflation goal on track

T HE government's plan to contain inflation to ten percent this year appears to

be working, although inflation is still running slightly above the goal,

according to recently released statistics by the National Bank.

The main

threat to inflationary control is the continuing price instability of rice due

to shortages in many areas of Cambodia.

Cheaper Vietnamese rice was

mitigating the effects but "at the end of May there seems to be a firming in the

price," according to a government researcher.

Some of the increase was

thought to be a seasonal increase in the price of rice, which normally occurs

between June and October.

The Consumer Price Index was running at a

yearly rate of 11.5 percent in February and March, dropping to 7.1 percent in

April.

The rate has been brought down from about 26 percent for 1994 in

December. A Ministry of Finance estimate has suggested that if it were not for

an explosive increase in rice prices in the fourth quarter of last year,

inflation for 1994 would have been 7.2 percent.

The inflation

stabilization effort has been progressing since the second half of 1993. In

March 1993, the annual rate of inflation was measured at 340

percent.

There was a substantial drop in the CPI index in February of

negative 5.1 percent. The CPI in March was 1.2 percent and in April it was

negative 0.5 percent.

The index is based on a survey of goods and

services from three markets in Phnom Penh, Psar Thmey, O Russey and Chabar

Ampeou.

According to the report, the sudden appreciation of the riel in

March by 9.2 percent affected import prices, particularly for Thai textiles. The

clothing index registered a monthly drop of 6.4 percent in March.

The

riel jumped in value from 2,611 at the end of February to reach 2,280 riels on

the dollar on March 31. The appreciation began with the introduction of new

higher denominations. Since then the riel has stabilized at about

2,350.

The appreciation of the riel also had a large impact on the

evaluation of net foreign assets. Net foreign assets of the banking system

decreased by 38.3 billion riels or 9.5 percent in March

But the overall

money supply declined by 15.9 billion riels, or 3.5 percent in March, after a

rise of 4.6 percent in February. The slight fall was attributed to a decline in

checking accounts and riels held outside banks. The money supply figure, however

doesn't include the dollars in circulation; only riels.

Credit expansion

as measured by commercial loans to the private sector, declined slightly in

March after having increased steadily since December. The commercial loans in

March were measured at 261.7 billion riels, compared 276.2 billion riels in

February.

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