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Uncertainty stokes inflation

Uncertainty stokes inflation

I NFLATION took a sharp upward trend in April, the latest monthly report from the

National Bank of Cambodia found.

Prices rose by 3.64 percent in the

month, compared with 1.23 percent in March. Food prices alone rose by nearly 5

percent. Over the first four months of the year inflation nearly reached 8

percent.

The report said: "This shows a worrying situation as compared

with the government's policy objective of bringing the annual inflation rate to

10 percent for the year of 1994 as a whole."

The larger increase in April

was attributed to "psychological factors" which lead to rice hoarding and

consequent upward pressure on rice prices.

"The more important factors

which contributed to such a rise were the seasonal demand for consumer goods

during the New Year celebrations and the speculative rise engendered by

political disturbances," the report said.

It was during April the Khmer

Rouge recaptured their headquarters at Pailin from Royal Government forces and

then launched an offensive which threatened Battambang.

The report did

point out that the performance in April was still better than in the

corresponding month last year when prices went up by 15 percent during the

Untac-inspired boom.

No blame for the rise in inflation was attached to

the increase in money supply, with it increasing by 5.5 percent or 23.2 billion

riel in April as against a 10 percent or 38.7 billion riel increase in March.

The decline in the increase in the money supply was put down to a drop

in the growth rate of foreign currency deposits to 9 percent from 18 percent in

the previous month.

One measure of confidence in the economy found by the

report was a decrease from 50 to 40 percent in the amount of total broad money

held outside the banking system during the first four months of the

year.

Political uncertainties during the month were also blamed for a 1.6

percent softening of the riel against the dollar. The rate hovered around 2,485

to 2,490 riel to the dollar at the beginning and middle of the month and peaked

to 2,520 at the end of April.

Total foreign exchange assets in the

banking system increased by 13 percent, or 60.2 billion riel in April to reach

513.2 billion riel.

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