The US dollar and the riel currently play complementary roles in Cambodia’s economy. Supplied
Entrepreneurs and economists assert that creating riel-denomination bank accounts for businesses in Cambodia will contribute to increasing the use of the riel in the market, help maintain price stability and strengthen the Kingdom’s financial sector.
On November 1, the National Bank of Cambodia (NBC) and the Ministry of Commerce issued a joint notice which urged all banks and financial institutions to collaborate in establishing riel-denominated accounts for all legally registered businesses.
The notification explained that to reinforce the implementation of the Law on Commercial Enterprises and promote the use of the riel in the business sector – as well as support financial stability in line with the Cambodia Digital Economy and Society Policy Framework 2021-2035 and the Fifth Angle of the Rectangular Strategy, Phase 1 of the seventh-mandate government – the NBC and the ministry are calling for riel accounts to be set up.
“The use of the riel is important for enhancing the effectiveness of implementing national macroeconomic policies, particularly in maintaining price stability in the market, reducing the operational costs associated with dollarisation, supporting exports and investments, preserving international reserves, improving social welfare, generating revenue from currency issuance, and strengthening national identity and sovereignty,” it added.
Lor Vichet, vice-president of the Cambodia Chinese Commerce Association (CCCA), told The Post on November 5 that the circulation of the US dollar in Cambodia’s economy currently accounts for about three-quarters of the total economic volume. Heavy reliance on the dollar can create challenges for the national economy, should the US Federal Reserve raises interest rates, which would in turn drive up the dollar loan interest rates in Cambodia.
“The high volume of US dollars in the economy exerts significant pressure on Cambodia's national economy, particularly when the US central bank raises interest rates. This can increase production costs in Cambodia, making the country’s exports less competitive in international markets,” he said.
“The measure to establish riel accounts for all legally registered businesses will provide more payment options and help increase the circulation of riel,” he added, while acknowledging that exports to international markets still rely on the US dollar for transactions.
Lim Heng, vice-president of the Cambodia Chamber of Commerce (CCC), stated that from the private sector's perspective, he fully supports the creation of riel accounts for all businesses, as this will increase the use of the riel and reflect Cambodia’s economic strength. He added that the chamber has been promoting the use of the riel among business owners, encouraging them to pay employees in riel.
Regarding foreign investment, Heng remarked, “I believe that using the riel will not diminish the benefits for companies or enterprises.”
Hong Vanak, an economist at the Royal Academy of Cambodia, said that using the national currency is essential for any country, as it not only promotes national pride and identity but also enables the central bank to manage monetary flows within the economy more effectively.
“Encouraging financial institutions to open riel accounts for individuals and businesses in Cambodia will bring several benefits to the national economy,” he said, while warning that the process should be implemented gradually.
He noted that due to the long-standing dollarisation of the economy, it is not feasible to quickly reduce reliance on the dollar. If the dollar were to be removed abruptly, it could pose challenges for international transactions.
“When trade balances with international markets become favourable, confidence in and usage of the riel will grow,” he added.
