The National Bank of Cambodia (NBC) marked the 36th anniversary of its reintroduction of the national currency on Sunday, using the event to continue its calls to boost use of the riel in a highly dollarized economy.
Speaking on the sidelines of a ceremony at the Cambodia-Japan Cooperation Center, the NBC’s director-general Chea Serey said the bank was urging the private sector to join it in promoting the local currency.
“Riel is popular in rural areas, but the dollar is preferred in urban areas, mainly because people have become familiar with using dollars. That’s why we want to push using riel currency more,” Ms. Serey said.
The central bank is preparing to launch a system this year that will facilitate money transfers—from one account to another, as well as between different banks—only in riel. Banks and other financial institutions will be required to join the system by early 2017.
Neav Chanthana, a deputy governor of the NBC, told a crowd of about 300 at the ceremony that the riel was re-introduced on March 20, 1980, after four years of the absence of a central bank and all forms of currency under the Khmer Rouge.
The U.S. dollar, however, has been the preferred currency in Cambodia since the early 1990s, when the U.N. Transitional Authority in Cambodia injected about $2 billion into the country’s economy.
Ms. Chanthana explained that wider use of the national currency would give the central bank a broader ability to use monetary tools to keep the economy stable.
Sok Piseth, the president of Young Entrepreneur Association of Cambodia, which sponsored the event, said about 10 of the association’s more than 100 members pay salaries in riel and price their goods and services in both riel and U.S. dollar amounts.
“We want our people to understand the value [of] our local currency,” Mr. Piseth said.
Talks of de-dollarizing the country and promoting wider circulation of riel began years ago. The conversation intensified when the country’s first stock exchange, the Cambodia Securities Exchange, opened in 2011. Despite foreign investors lobbying for the stock market to operate in dollars, the Securities and Exchange Commission of Cambodia eventually decided to use riel.
Although progress has been slow, the government has implemented a number of measures in recent years to encourage the use of riel—such as increasing the reserve requirement for U.S. dollar deposits (12 percent, compared to 8 percent for riel deposits) and using riel for all government transactions, taxes and utilities.