National Bank of Cambodia (NBC) deputy governor Chea Serey on March 20 made a general call to keep using the local currency in day-to-day transactions, as part of de-dollarisation and other monetary policy initiatives, as a means to promote economic development.

Speaking at a ceremony marking the 43rd Anniversary of the Re-introduction of the Riel, also known as Riel Day, Serey – who was newly-promoted from NBC assistant governor – revealed that since 1998 the USD/KHR exchange rate has averaged 4,036 with a roughly one per cent range of fluctuation in either direction.

Serey argued that the riel’s stability mirrors the health of the Cambodian economy, indicates strong development in the country, and has thereby inspired confidence among investors and the general public in the local currency as well as the economic future of the Kingdom.

Effective currency circulation management has ensured that regional demand for the riel is by and large met nationwide, she said.

“Greater use of the riel will enable the [NBC] to implement more effective monetary and exchange rate policies, especially when it comes to setting benchmark interest rates and injecting cash into the economy, which could have an impact on interest rates, markets, investment and production, as well as lead to job creation and increase people’s incomes.

“The riel is our national currency, hence using it genuinely contributes – directly and indirectly – to safeguarding and attaining a greater sense of economic sovereignty, national identity and unity as well as to socio-economic development,” she added.

Serey said the high level of dollarisation in Cambodia limits the effectiveness of the NBC’s monetary policy, given the constraints on the central bank’s ability to deal with certain issues involving the US dollar, which is managed by the Federal Reserve (Fed).

Therefore, use of the national currency is vital to gaining monetary independence, macroeconomic stability, and blunting the severity of external crises, she said.

The NBC will continue to implement monetary policy and measures to promote the use of the riel based on market mechanisms, as well as ramp up cooperation with stakeholders to more effectively implement work to this end, she added.

Serey issued a general call to use the riel – and encourage others to do so – in transactions, the labelling of goods and services, loans and savings accounts, and other day-to-day scenarios.

At the same event, Royal University of Law and Economics (RULE) professor Srun Sopheak described the decades-long simultaneous use of the two currencies in Cambodia as a “special problem”, contending that a continued “dollar-denominated economy” could undermine the Kingdom’s sovereign right to make its own monetary policy decisions.

“Now may be the right time to promote the use of the riel on the government’s agenda, as Cambodia’s macroeconomic parameters show that the market is ready for the national currency to affirm its place as the primary means of payment,” he said.

Sopheak echoed Serey’s sentiment, remarking that high dollarisation and the free movement of foreign currency in the economy limits the NBC’s ability to implement monetary policy and keep prices stable.

“If Cambodia were to exclusively use the riel, the central bank would have more power to use monetary policy instruments to develop the national economy, that – among other things – devalue the currency to boost exports and adjust base interest rates to encourage investment,” he opined.

In this case, he said, the NBC could also serve as a more effective lender of last resort and better provide liquidity support to the financial system in the event of an emergency.