Cambodia: Sustained campaign for riel promotion
Considering the significance of local currency in enhancing the economic aspirations of the country, the National Bank of Cambodia has been consistently promoting the usage of riel. The central bank’s efforts in popularising the usage of local currency have gained momentum with a reported increase in the activity for riel. According to a survey by the National Bank of Cambodia and the Japan International Cooperation Agency, the riel is widely used in day-to-day expenses.
While talking at a function on August 30 to mark the 42-year anniversary of riel circulation in Kampot province, Chea Serey, Director General of Central Banking of the National Bank of Cambodia, said, “The implementation of monetary policy, combined with the participation of all stakeholders, has resulted in a steady increase in the volume of riel in circulation, as its value has stabilised, reflecting the growing demand and public confidence in the local currency.”
Serey said the presence of riel has contributed significantly to the restoration and building of economic and social sovereignty through its role as a scale value, means of payment and savings. She attributed this to political stability, macroeconomic stability and development in all areas to make people and investors repose more confidence in the currency and the future of the Cambodian economy. “Since Cambodia is a highly dollarised economy, it is difficult for the central bank to successfully execute its mission as the NBC is limited in the number of policy instruments it can use to promote sustainable economic development,” the National Bank of Cambodia said in its booklet ‘The importance of Riel to Cambodia’. It said dollarization has positively contributed to Cambodia’s economy with an average of 8.5 percent growth over the last 15 years.
The booklet also listed some of the prominent reasons for promoting the usage of riel. One of the main reasons is the national pride and solidarity, it pointed out.
“Every country has its own currency. It represents the collective identity of a nation. By using the national currency, we preserve our past. We are reminded of our shared history, cultural heritage and collective identity for current and future generations. Through our national currency, we reinforce the notion of solidarity and a sense of belonging that we are part of one community, one nation,” the booklet mentioned. Another significant aspect of supporting the national currency is to promote price stability. “As with any goods, an over-supply of money in circulation would diminish its value, leading to inflation. Similarly, an under-supply of money in circulation would increase its value, leading to deflation. To maintain price stability, the NBC can control the money supply by either absorbing money from the market or injecting it back into the market,” the report said.
By promoting the usage of riel, the bank also intends to reduce the transaction costs. “Using more than one currency in the economy increases the transaction costs both in terms of money and time. As riels and dollars circulate simultaneously, buyers are subject to exchange rate risk depending on the currency they hold. The exchange rate is determined by the sellers, disregarding the market trend,” the bank pointed out, adding, “Using one currency in all domestic economic transactions would help substantially reduce the costs for both buyers and sellers. In addition, it could facilitate and stimulate more transactions, which could be done faster and more efficiently as both sides won’t have to encounter difficulties related to price and exchange rate differences.”
Besides, Cambodia relies heavily on exports and tourism for economic growth. “If Cambodia were to use the riel alone, the central bank could further promote exports by increasing price competitiveness through currency devaluation,” the report pointed out. The NBC has also been extending its riel promotion campaign in the provinces as well. Attending such an event in September, Serey praised the participation in Battambang and said that according to previous studies, 80 percent of daily expenses in Battambang are made in riel.
“Revenues and expenses of operations of banking and financial institutions in Battambang in riel have increased significantly. In the last two decades, the riel in circulation has increased by 16 percent, deposits in riel by 29 percent and loans in riel by an average of 38 percent per year,” she pointed out