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Cambodian monetary policy to maintain exchange rate stability
The National Bank of Cambodia (NBC) will be maintaining exchange rate stability over the next quarter. The decision was announced as part of the 56th Monetary Policy Committee meeting results. That meetng was held last weekend.
At the meeting, the current state of the global economy was discussed along with present macroeconomic challenges to financial stability in Cambodia and how they can be addressed via monetary policy.
Chea Chanto, governor of the NBC and chairman of the Monetary Policy Committee, stated that the maintenance of prices and improvement of monetary policy over the next quarter informed the decision by the committee to maintain exchange rate stability and that intervention in foreign exchange markets would be availed of if deemed necessary.
The NBC will continue to provide liquidity through liquidity-providing collateralised operations (LCPO) transactions every two weeks to meet the short-term riel liquidity needs of banking and financial institutions. The reserve requirement rate of 7 percent will also be maintained for both dollars and riels.
In an extensive interview granted to Khmer Times last March, the NBC governor discussed the monetary policy tools which Cambodia uses to effectively stabilise the nation’s financial situation at various times, particularly when challenges arise.
He noted that over the last two decades, exchange rate stability has been maintained and recognised as an important factor in the Kingdom’s macroeconomic steadiness.
The governor cited how in 2020, the value of the riel against the dollar was stabilised quite well despite a slight depreciation (of less than 1 percent). He noted that the depreciation was relatively lower than that of other regional currencies and was the result of weakened domestic economic activities and low inflow of foreign direct investments at the time.
Both then and now, the NBC minimises volatility in the exchange rate, by making use of a number of tools to absorb or inject liquidity from or into the market. These include foreign exchange interventions via LCPOs to inject liquidity or and the absorption of riels through Negotiable Certificate of Deposits.
Source: https://www.khmertimeskh.com/50922563/cambodian-monetary-policy-to-maintain-exchange-rate-stability/