The central bank (NCB) injected $500 million of cash into the market to maintain the stability of the riel and preserve purchasing power with depreciation pressure pushing the riel to KHR 4,099 for $1 in December.
According to National Bank of Cambodia report: “Increasing public expenditures coupled with weaker demand for the local currency have put depreciation pressure on the value of the riel, especially in a context where Cambodia has a high level of dollarization.”
“The central bank continuously intervened in foreign exchange market by injecting approximately $500 million to maintain the market exchange rate at around 4,099 riels per US dollar, a slight depreciation of approximately 1% compared to that in 2019,” it added.
NBC policy has aimed at maintaining the value of riel, through foreign exchange interventions (direct sales of dollars, to absorb cash in riels from the public, and to accommodate the demand of utility companies).
Since 1994, the spread between the two rates has generally been maintained in the vicinity of 1 percent of the market rate on a daily basis.
Stable riel a key policy agenda for NBC
“Exchange rate stability and sound management of money supply in the economy have contributed significantly to price stability, with a low inflation rate of 2.9%. It is noteworthy that inflation in 2021 was contributed by the rebound in the price of oil-related items while food price and core inflation decelerated,” NBC stated.
The central bank has embarked on a recent de-dollarization agenda promoting national pride as well as implementing several policy agendas such as requirements of paying government organizations in local currency.
In 2020 the NBC caused a panic after issuing a statement for financial institutions to hold all $1, $2 and $5 bills causing many retailers to reject the notes as legal tender.
For many investors, the use of dollars has been key in facilitating the integration process of Cambodian trade in the international economy with currency stability promoting stability and a predictable business environment.