Despite recent efforts by the State of Cambodia to stem wild fluctuations by the

national currency, the riel plummeted again in mid-March, losing nearly 80 per cent

of its value against the dollar within a 72 hour period.

Prices of goods sky-rocketed and merchants closed up shop as the price of the dollar

rose from around 2,500 riel on Thursday morning to 4,500 in trading early Saturday.

In the provinces the situation was even worse. In Siem Reap the dollar was reportedly

changing for as much as 8,000 riel.

Last week's dramatic currency fluctuation came after a period of stabilization and

left economists groping for answers as to what had triggered the situation.

Sources at the United Nations Transitional Authority in Cambodia (UNTAC) dismissed

early speculation that the State of Cambodia (SOC) had been printing fresh money

to cover its chronic debts, a practice that had triggered earlier devaluations of

the riel.

"It's either a reaction to expansion in supply or decrease in demand or some

combination of the two. Demand for the riel has shrunk very rapidly, perhaps due

to a loss of confidence (in SOC)," said Roger Lawrence, economic advisor for

UNTAC.

Amid the confusion, rumors spread throughout the city that a new government currency

would replace the SOC-issued riel as the national currency piling more pressure on

the riel.

The price of basic foodstuffs soared in response to the plunging riel. The price

of pork had increased four-fold by Saturday morning, up from 5,000 riel per kilo

to 20,000. The price of rice rose from 200 to 1,200 riel per kilo.

Farmers began refusing to accept riel for their produce, demanding to be paid in

gold, dollars or Thai baht.

Traders at Orasey, Kandal, Thmey and other markets across Phnom Penh who faced the

risk of large losses on Saturday's trading shut up shop and markets were closed across

the city.

Particularly hard-hit by the fall in value of the riel was the large percentage of

the population who do not have access to dollars to protect themselves or employees

on fixed salaries.

"I usually pay 600 riel for one meal. Though I never dare have a bowl of noodles,

but today I had to pay 3,000 for the same meal," Sun Chhoeun, a cyclo driver,

said.

Soen, another cyclo driver sat alone in front of the deserted Psay Thmey market,

visibly upset.

"Oh my God, how can we match the market price. My breakfast yesterday cost 800

riel and now it is 2,500 riel and I have children to feed as well," he said.

The riel's dramatic fall evoked memories of the last days of the Lon Nol regime and

rumors began circulating Phnom Penh that students would demonstrate against the spiralling

costs.

SOC ministers blamed the explosion of prices on its political opponents, saying they

were trying to destabilize its administration in the run-up to the election.

"Political sabotuers and big businessmen are taking advantage of the situation

as part of their political campaign and for profit," said Vice Minister of Finance

Chheang Vun.

SOC spokesman Khieu Kanharith blamed the frenzied currency trading on an injection

of Khmer Rouge bank notes worth U.S. $200,000 into the country's economy and rumors

of terrified Vietnamese changing their savings and fleeing for their homeland after

the Siem Reap massacre.

Chheang accused private aid organizations and the U.N. peace- keeping mission of

exacerbating the problem.

"The NGOs and UNTAC say they want to help the Cambodian people but at the same

time they refuse to use riel and only make the situation worse and worse," he

said.

Chheang Vun said SOC would not issue any new large denomination notes.

Oun Pin, chief of Psar Thmey said merchants refusing to accept the unpopular 50 riel

"would be toughly dealt with."

"Those who refuse to accept will be accused of staging economic sabotage. That's

why we must succeed because the elections are coming," said the Vice Minister.

Late in January, the National Assembly adopted a law intended to control the circulation

of the riel and stem the flow of conterfeit bank notes onto the market. Individuals

who breach the law face a fine from 100,000 to 200,000 riels or imprisonment from

one month to one year depending on the seriousness of the violation.

Since January, SOC-run radio and television have broadcast statements from the

National Bank of Cambodia saying that the 50- riel note was still a valid currency.

But all the government efforts to control the currency have met with little success.

"Our bank is too slow to react , that's why we have all these problems,"

Kanharith said Mar. 23.

"Now we are reviewing our banking systems so we can react quickly to the situation,"

he said.

He said that on Friday and Saturday the government was trying to utilize its slim

hard currency reserves to reduce the fluctuation of the exchange rate. "We prepare

some movements, and we are ready to spend millions of dollars to curb the situation.

Our main objective is to bring the exchange rate down to 2,500 riels to a dollar,"

said Kanharith.

At the Olympic Market, every stand-shop has a sticker-note issued by the market controllers,

which says "I accept all types of denomination notes without lowering the face

value [local term: Kat Teuk]."

But merchants and market officials said they were skeptical about SOC's ability

to contain the riel.

"The bank has never been effective at all. No clear measure has ever been seen.

Its sub-decrees only make everybody feel exhausted," said 43 year-old Klot Samkhan,

chief of Orasey market.

"If we want the riel to be stable again we should do something within the next

two or three days otherwise other problems will crop up and the riel will further

devaluate," he predicted.