A panel of economists yesterday cautiously addressed the subject of switching from US dollars to the riel as Cambodia’s main currency, saying this could cause problems while resolving others.
Since the end of Cambodia’s international isolation in the early 1990s, the economy here has been cash-based and heavily dollarized.
Finance Ministry Secretary of State Hang Chuon Naron said yesterday he was not yet comfortable with prescribing a specific timeline or benchmarks for dampening dollar dependence. Looking abroad for examples of countries succeeding or and failing with de-dollarization, Mr Chuon Naron pointed to Vietnam, where a devalued Dong has led to mass investments in gold, as a cautionary tale.
“I think the key thing here is to be pragmatic,” he said, speaking at ADB’s Phnom Penh office during the release of a development bank publication currencies in transitional economies.
“Having your own currency has its own set of problems and…if you do this too fast then it is a hollow victory and that is something we should bear in mind, especially those who are becoming impatient with how long this has taken,” said Jayant Menon, principal economist for the ADB’s Office of Regional Economic Integration, who co-edited the book with Giovanni Capannelli, who holds the same title.
Mr Menon said that the credibility of the riel, which currently amounts to only 10 percent of money in circulation, will be the key issue at play as the government tries to remove dollars from circulation to empower the central bank to set interest rates and guide exchange rates.
“My personal preference would be to leave the option open,” Mr Menon said of whether or not the long-awaited stock exchange should be based in riel or dollars. “I think the important thing is to reduce the differences the public sees.”
In the ADB book released yesterday, Huot Pum, deputy director-general of the Securities and Exchange Commission of Cambodia and Khan Vanek, deputy director of the Finance Ministry’s budget department, describe de-dollarization as both a means for the government to establish independent monetary policy and as a potential threat to currency stability and wealth storage.
