Logo of Phnom Penh Post newspaper Phnom Penh Post - Pride of Cambodia is riel in the economy, say financial experts

Pride of Cambodia is riel in the economy, say financial experts

Content image - Phnom Penh Post
A robust three-decade growth transformed Cambodia into a stable economy in Asean. Heng Chivoan

Pride of Cambodia is riel in the economy, say financial experts

The time is now conducive to push the government’s riel agenda as Cambodia’s macro-economic parameters indicate that the contemporary market is relatively ready for the national currency to be the main medium of exchange.

Cambodia has a unique dilemma – juggling two currencies – the riel and the US dollar – both functioning in parallel to support trade and commerce for nearly three decades.

But a continuous dollar-dominated economy could pinch on Cambodia’s sovereignty to roll out broad-based monetary policies as the dollar’s fate depends on the US Federal Reserve.

Bankers and experts say Cambodia is now ready to shed the dollar-linked image as the steadfast riel’s stability could weather any economic turbulence to better reflect the resilient economic fundamentals.

“The market conditions are important. There is a good monetary policy, good economic growth for the last two decades, the riel is stable compared to other currencies in the region, and there are no fluctuations with inflation low. These factors are important,” Dr In Channy, President  and Group Managing Director, of Acleda Bank Plc told The Post.

Content image - Phnom Penh Post
“I think key business sectors will gradually accept the Khmer riel”. Supplied

The Kingdom has chalked up an impressive growth record for nearly two decades, with gross domestic product (GDP) growth at about seven per cent, a moderate inflation rate of 3.2 per cent (2018), current account deficit at about 10 per cent and foreign reserves at $11 billion; and the riel value is stable at 4,050 to the US dollar.

These are a few indicators that the economy is fertile for the riel to be the sole currency, which so far has played second fiddle to the dominant dollar.

The National Bank of Cambodia (NBC) is trying to tilt the currency imbalance in a genial fashion to avert chaos in the financial market and build confidence in the riel to consolidate its position. 

The central bank has undertaken a slew of measures to promote wider use of the local currency – such as the 10 per cent loan portfolio requirement for all commercial banks and microfinance institutions to be achieved by 2019 as well as requiring payment of taxes and utility bills are settled using the riel. And, traders and supermarkets,have been directed to display price tags in riel.

“It is important for Cambodia to have its own currency. It is about sovereignty. We will have our own identity, our own currency. It is national pride as well,” added Channy.

But that can be a herculean task given the dollar is so intertwined in the local economy.

The bulk of the transactions are still conducted using the dollar – about 90 per cent of  commercial banks and microfinance institution loans are dollar-denominated while private sector wages are paid in the US currency.

For instance, about 700,000 garment workers are paid in US dollars, according to numerous reports.

The dollar is still a much preferred  currency in property dealings (sales and purchase) and even at the retail level, the dollar still remains popular.

Content image - Phnom Penh Post
The local stock exchange was set up to encourage the use of the local currency. Heng Chivoan

“The challenge is that over 80 per cent of money in circulation in Cambodia is in US dollars and we are not the only country as there are a few other countries [that] do the same [dual currency system]. But we are different from others.

“It should be a psychological approach and market approach which the government of Cambodia is doing successfully. It should not be regulatory forced. I think key business sectors will gradually accept the Khmer riel. I have noted so far increasingly, the public is favorable with the Khmer riel,” Channy added. 

There is a wind of change. The riel seems to be slowly gaining trust and its usage is rising. 

In the first six months of 2017, the NBC pumped in about two trillion riel ($488 million) into the economy, which was an 18 per cent jump compared to the year before. A clear signal that demand for the riel is rising.

Samsen Neak, research director of Nuppun Research and Consulting, said the riel has seen an increased usage in the market, especially in the cities. 

Content image - Phnom Penh Post
Samsen: Options for monetary policies to navigate the economy limited. Supplied

“In the past, malls, supermarkets and high-end restaurants displayed prices only in US dollars,but now they have them in both dollars and riel or in some places only in riel.

“Usage of riel is also about national pride. It is time for Cambodians to promote the riel. But, this has to be a gradual process, given that the riel was abolished during Pol Pot’s time and the currency depreciated very sharply in early 1990s when Cambodia was in transition to market economy,” added Samsen.

He said if the riel emerges as a single dominant currency, then the NBC would have a greater range of options to implement its monetary policies, along with fiscal policies by the Ministry of Economy and Finance. 

“Now, with highly a dollarised economy, options for monetary policies to navigate the economy are very limited. The most important thing to do is to make sure that the riel continues to be stable."

“And, in the meantime, the next steps the government might want to explore is to have price quotes in riel for all government works and to encourage the private sector to pay salaries in riel,”said Samsen.

MOST VIEWED

  • Research key to Kanitha’s rep for expertise

    Sok Kanitha is used to weighing in on controversial issues using a confident approach that signals expertise and authority, and a recent video she made was no exception. Her “Episode 342: The History of NATO” video went live on January 16, 2023 and immediately shot to 30,000 likes and 3,500

  • Cambodia maintains 'Kun Khmer' stance despite Thailand’s boycott threat

    Cambodia has taken the position that it will use the term "Kun Khmer" to refer to the sport of kickboxing at the upcoming Southeast Asian (SEA) Games, and has removed the term Muay from all references to the sport. Despite strong reactions from the Thai

  • Knockout! Kun Khmer replaces ‘Muay’ for Phnom Penh Games

    Cambodia has decided to officially remove the word Muay from the programme of the 32nd Southeast Asian (SEA) Games 2023 in May. “Kun Khmer” will instead be used to represent the Southeast Asian sport of kickboxing, in accordance with the wishes of the Cambodian people. Vath

  • Artificial insemination takes herd from 7 to 700

    Some farms breed local cows or even import bulls from a broad for the purpose of breeding heavier livestock for meat production. One Tbong Khnum farmer has found a more efficient way. Hout Leang employs artificial insemination to fertilise local cows. Thanks to imported “straws”

  • New int’l airport nearly half complete as travel industry returns to life

    Construction of a new airport that is slated to serve the capital has passed the 43 per cent completion mark, raising prospects for a proper recovery in the civil aviation and tourism sectors as international travellers return to the Kingdom in increasingly large numbers. The figure

  • Chinese group tours return to Cambodia starting Feb 6

    Cambodia is among 20 countries selected by Beijing for a pilot programme allowing travel agencies to provide international group tours as well as flight and hotel packages to Chinese citizens, following a three-year ban. As the days tick down until the programme kicks off on February 6,