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Cambodia: Following Fed move, local banks eye increase in loan rates
Following the increase in interest rates by the US Fed, some of the local banks are also looking to increase the interest rate for their clients’ loans, said a senior official at Cambodia’s central bank, calling on the use of more riel currency as the best tool for the financial policy.
The Federal Reserve raised the benchmark of interest rates from March last year, pushing interest rates around the world to go up.
Following this local banks, including banks and financial institutions, feel that they have to increase the interest rate of customers’ loans, Chea Serey, deputy governor of the National Bank said at an event on the 43rd anniversary of the re-introduction of riel currency in Sihanoukville province on Wednesday.
“The hike in interest rate is because Cambodia has a high rate of dollarization and almost all of the loans are disbursed in US dollars,” Serey said.
Some local banks are starting to raise their interest rates by at least 0.5 percent a year on loans to customers.
The local banks that have started raising interest rates for customers are Cathay United Bank and SBI LY HOUR Bank, which will be implemented from April 2023 onwards.
With about 85 percent of money transactions in the US dollar, Cambodia lost ownership of its monetary policy, Serey said, adding that if riel is used in large amounts, the NBC would be able to control interest rates in the market through riel interest rate in interest rates for banks and financial institutions.
“Facing this issue, the wide use of riel is important in contributing to the increasing possibility of the National Bank of Cambodia in controlling changes of interest rate and price stability for strengthening the national economy,” she said.
She called on ministries, public institutions, banking and financial institutions, factories, companies, enterprises, business owners, citizens and all stakeholders to continue to contribute more actively to the use of the riel in their operations through payment, labelling of goods and services, credit and savings in KHR, as well as providing favorable conditions for the use of KHR.
A report by IMF showed that Cambodia has the highest dollarization rate in the region, while the dollarization rate in neighboring countries such as Laos and Vietnam tends to decline.During the last decade, the circulation of riel has grown by an average of 14 percent per year, reflecting the growing demand for riel in the economy even though the level of dollarization remains high, according to NBC.
Source: https://www.khmertimeskh.com/501269340/following-fed-move-local-banks-eye-increase-in-loan-rates/