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Dollarisation level still over 80% in Cambodia
Despite the continued efforts by the National Bank of Cambodia (NBC) to promote the use of riel (KHR), the level of dollarisation in the country still remained over 80%, according to the Financial Stability Report 2021, released by the central bank recently.
This level of dollarisation limits the NBC’s role in influencing money supply and interest rates in the country, the report said. “A more riel-based economy will allow the NBC to effectively implement monitory policy in response to economic shocks. Therefore, NBC has put efforts into gradually de-dollarising the economy through the facilitation of the KHR usage, regulation setting that aims to boost loans in KHR and public awareness-raising of the role of the national currency in strengthening economic resilience,” the report said.
“These efforts have contributed to gradually decreasing financial dollarisation measured by the ratios of foreign currency deposits to total deposits,” the report added.
While banks’ local currency lending stayed above NBC’s required threshold of 10%, most lendings continued to be in US dollars. A currency-wise breakdown of gross loans indicates that almost 88.6% of overall lending in 2021 was in USD, with share of riel loans standing at around 11.4%.
This shift towards the reilisation of credit has been duly supported by NBC in terms of riel liquidity provision through its Liquidity Providing Collateral Operations (LPCO) since 2016.
Similarly, bulk of the deposits with banks also remained in USD, accounting for 91.4% of total deposits in 2021. The share of riel deposits, however, rose from 6.1 percent in 2018 to around 9% in 2021.
NBC’s policy requiring banks to lend at least 10% of their credit in riel has encouraged banks to raise more local currency deposits, the size of local currency loans of KHR 18.3 trillion still remained higher than the local currency deposits of KHR 13.7 trillion the banks managed to collect in 2021, necessitating continued injection of riel liquidity by NBC through its LPCO arrangement, the report said.
Source: https://www.khmertimeskh.com/501098527/dollarisation-level-rules-over-80/