Cambodia works to reduce dollarization

Cambodia is designing plans to give its riel (the local currency) a boost in an attempt to limit dollarization, China’s Xinhua news agency quoted Neav Chanthana, Deputy Governor of the National Bank of Cambodia (NBC), as saying.

Dollarization in Cambodia, measured by the ratio of foreign currency deposit to broad money, grew from 36% in 1993 to around 80% in 2013, she said at the Second Annual NBC Macroeconomic Conference. 

Meanwhile, NBC's Director General Chea Serey said over 90% of bank deposits and loans are made in US dollars. 

The financial sector plays an essential role in promoting the use of local currency through strengthening financial infrastructure and financial market development, including the foreign exchange market, interbank and money market, capital market and debt market, she told the conference, which was attended by about 200 policymakers, bankers, economists and researchers, among others. 

The US dollar began to be used widely in the Cambodian economy since the United Nations Transitional Authority in Cambodia (UNTAC) conducted their peace operations in the country in 1993. 

Chanthana said the Cambodian economy has reaped many benefits of dollarization by attracting more foreign investors, developing the financial sector, enhancing the Cambodian economic integration regionally and globally as well as protecting the economy from the Asian financial crisis in 1997. 

However, dollarization also presents risks and vulnerabilities since the speed and size of the economy and the financial sector have grown remarkably, she said.