National Bank of Cambodia Governor Chea Chanto held a brainstorming session Wednesday to discuss ways of stabilizing the riel as the local currency slid to its lowest level since February.
The riel’s market value sank to as low as 3,860 against the US dollar in some Phnom Penh exchange shops Wednesday, from 3,600 at the same time last week.
National Bank Deputy Director Chea Sok blamed the riel’s downward slide in part on the economy’s heavy reliance on dollars.
Business people from the provinces have been coming to Phnom Penh to exchange large amounts of riel spent in markets over the New Year period last month, causing the currency to lose strength against the dollar, he said.
“Businessmen buy dollars and Thai baht so they can then buy goods from Thailand and sell them in Cambodia for riel,” he explained. Exchange shops are now being crowded with businessmen exchanging local currency from the New Year spending boom in provincial markets.
Chea Sok also blamed the plunge on the government’s failure to collect taxes.
On Wednesday, Chea Chanto invited currency traders from local exchange shops to the National Bank to debate ways of halting the riel’s decline and prevent a rise in local market prices.
A representative of the capital’s Ly Hour exchange shop who attended the meeting agreed that the recent flood of riel onto the market had contributed to the currency’s fall.
“Many people have come from the provinces to buy gold and dollars, which is why exchange shops are increasing the price of the dollar,” she said.
The currency trader also attributed this week’s fall in the riel to the failure of the bank to hold their usual twice-weekly riel auctions on account of public holidays.
In response, the National Bank is now offering riel for auction and is appealing to businessmen to come and buy the currency at a lower rate than offered on the local market, Chea Sok said.
He added that the National Bank currently has sufficient dollar revenue to buy up riel in the market, but is suspending a decision on whether to do so until it become apparent whether the riel will stabilize on its own.
