T he National Bank of Cambodia painted an encouraging picture with its

newly-released report on the economy covering January.

Inflation as

measured by the Consumer Price Index increased by 2.23 percent in January but

the overall trend was downward, with the December rate at 3.82.

The

report added: "A lower than 10 percent inflation is forecasted for the year in

1994."

The riel remained relatively stable compared to the dollar,

falling by four percent in January compared to its December level, from 2,470 to

2,580.

"The exchange rate of the riel, which had witnessed volatile

movements earlier, came to be stabilized towards the close of the year at around

2,500 per dollar.

"Also the spread between the official and the market

exchange rates has narrowed considerably.

"These developments have

created the appropriate environment for sustained economic

development."

Liquidity rose by 12 percent in the month, an identical

increase to that in December, as measured by Broad Money.

The report, the

first monthly bulletin from the NBC, said: "While time and savings deposits rose

by five percent, the rise in foreign currency deposits was as high as 33

percent. The level of foreign currency deposits reached a new high of 152.4

billion riel."

Foreign exchange assets of the banking system rose by 18

percent for commercial banks to 307.2 billion riel at the end of January.

December also saw a significant increase of 21.6 percent.

The Royal

Government's credit with the banks declined from 187.6 billion riel in December

last year to 164.8 billion riel in January, largely due to government deposits

rising from nearly 31 billion riel to 50 billion riel, the report

said.

It added: "The trend in credit to the government reflects the

government's determination not to have recourse to central bank resources for

financing the budget deficit."