Foreign currencies and Cambodian riel are displayed at a money changing stall at Central Market in Phnom Penh. Photo by: Wesley Monts
Friday, 04 March 2011 15:00 Jeremy Mullins
DOMESTIC businesses and expatriates ought to make increased use of the riel according to National Bank of Cambodia Deputy Governor Neav Chanthana, who joined economists and students at a currency conference in Phnom Penh yesterday.
While Cambodians predominantly use the riel in daily transactions, according to the NBC, statistics show that over 90 percent of the value of domestic transactions is conducted in dollars.
“What we need from the private sector is to move to the local currency,” said Neav Chanthana at the Royal University of Law and Economics yesterday, reiterating the call to the expat community.
“People are confident in the local currency,”
She stated that the high level of dollarisation in the Kingdom restricted some of the policy options open to the NBC. “The economy is dollarised, so our role as lender of last resort is limited,” she said.
ACLEDA Bank Vice Chairman John Brinsden said that increased use of the riel would allow the central bank to have greater control over its monetary policy, such as the ability to control money supply and set interest rates.
According to officials, NBC has implemented measures – often behind the scenes – aimed at boosting confidence in the riel.
Government wages and taxes must be paid in local currency, said Neav Chanthana, while highlighting the role the NBC plays exchanging money for microfinance institutions who receive funding in dollars and make loans in riel.
John Brinsden said the NBC appeared to be pursuing a gradual change to the riel, which he said he supported.
“Over the long term, dedollarise and use our own currency – but let’s not rush into it,” he said, adding that support of businesses for using the local currency varied on a case by case basis.
The riel was prevalent in rural areas, meaning it made sense for businesses operating in such areas to use the local currency. However, he said business with overseas, dollar-denominated contracts would likely support continued use of the greenback, as it removed any exchange risk that came with using multiple currencies.
“Dollars remain dominant for income of private employees and bank account savings,” added Jean-Jacques Paul, project manager of French Cooperation to the Royal University of Law and Economics.
NBC Deputy Director of Research Khou Vouty said a survey conducted late last year indicated 37 percent of Cambodians receive income in riel, 27.5 percent in dollars, and 33 percent in multiple currencies.
Some 2.2 percent of Cambodians received baht, while 0.3 percent received the Vietnamese dong.
“Cambodia has had monetary plurality for a long time, but we’re not a unique country in this case,” he said.