Cambodia: NBC director-general explains economics of riels and dollars during the COVID-19 crisis

• Apr 07, 2020

The National Bank of Cambodia (NBC) has called on the public to increase their use of riels, to assist the central bank to utilise the national currency as an instrument to effectively stabilise pricing and interest rates in the market during the COVID-19 crisis, according to the NBC’s director-general Chea Serey.

Writing on her official Facebook page, she explained that in most countries their central bank can intervene in an economic crisis through lowering interest rates for commercial banks and financial institutions. However, because Cambodia is a dollarised economy, these levers are not as effective because the National Bank of Cambodia only has access to riels. “Typically when there is an economic crisis, a central bank will lower interest rates to encourage lending institutions to continue lending, allowing the continuation of public lending with low-interest rates,” Chea wrote,

“While the NBC has implemented these measures, its efficiency and effectiveness are limited. This is because the NBC only has access to lower interest rates effective on riels and, of course, cannot have influence over US-issued dollars,” she added.

This is why the central bank has been offering loans in riels at a low-interest rate, in an effort to encourage Cambodians to take out loans in their local currency. However, even with these policies, loans in riels have decreased from 25 percent in 2016 to 10 percent this year.

“We have no control over the interest rate of US dollars. Whether the Cambodian economy is good or bad is not their
[the US Federal Reserve] business. They take care of their people and their economy,” Chea wrote.

Source: https://www.khmertimeskh.com/50710320/nbc-director-general-explains-economics-of-riels-and-dollars-during-the-covid-19-crisis/