The government has been urged to make it compulsory for all business transactions and payments, which are less than 400,000 riel ($100), to be made in the local currency.
Lim Heng, Cambodia Chamber of Commerce (CCC) vice president, said that the move would immediately boost the use of the local currency.
“If we impose a regulation that requires people to pay in Khmer riel for goods below 400,000 riel ($100), the circulation of the local currency in the economy will increase dramatically."
“I believe that Cambodian people will be happy to comply with this directive because everyone says that they are patriotic and love Cambodia. So, to inculcate national pride, they will support the national currency agenda,” Heng said.
He also said that the value of the riel has been stable for more than a decade and it is time for the government to enforce a compulsory use of the local currency, starting with small payments such as paying for goods and services priced below 400,000 riel.
According to Lim Heng, if 10 million out of Cambodia’s population of 16 million spend about 400,000 riel per month on purchases, there will be four trillion riel ($1 billion) of local currency in circulation monthly in the economy.
He added that Cambodia receives about six million foreign tourists a year and they will need to exchange their currencies to the riel which will inject more of the national currency into the economy.
Heng, however, does not have the exact figure of the share of riel in the economy, but he said that its market share was still small.
The US dollar is mostly used for large-scale payments and this is mostly import and export segment.
But, he said that there is an increasing trend of riel usage in the economy thanks to government tax reforms that requires taxpayers to make payments in the local currency.
In addition, the directive making it compulsory for people to pay their utility bills like electricity and water in riel is also another major contribution to the increasing demand for riel.
Lim Heng also said that the directive by the National Bank of Cambodia (NBC) requiring all financial institutions to increase the proportion of loans in riel to 10 percent of their total loan portfolios by end of 2019 is increasing the local currency’s usage.
“It will be difficult at first when people are forced to use the riel but the Cambodian people should realise that it is their obligation to use the local currency,” he said, adding that his firm pays its staff’s salaries in riel although his income is in US dollars."
“I have seen an emerging trend of patriotic activities on Facebook among the youth. They are actively supporting the country. I believe that if they are asked to use the riel to pay for goods and services, they will support the move and will be happy to do so.”
As Cambodia is a heavily dollarised economy, the NBC has limited policy options to stabilise the exchange rate.
So far, using the riel to purchase dollars and making changes to reserve requirements to stabilise the exchange rate are the major approaches employed by the NBC.
According to the NBC annual report, between January and December 2018, the bank injected $875 million worth of riel into the economy to stabilise the exchange rate.