As Cambodia’s economy grows, the lack of access to monetary policies has made the Cambodian economy increasingly fragile, resulting in a reliance on fiscal policy, said Chea Serey, the Governor of the National Bank of Cambodia (NBC).

During the launch of the book, ‘Cambodia Dollarization: Its Policy Implications for LDCs’ on November 10, Serey said that dollarization has contributed to economic recovery and accompanied the achievement of high economic growth with macroeconomic stability over the last two decades.

However, high dollarization has restricted the implementation of monetary policy. “As the Cambodian economy has grown, the lack of full access to monetary policy has made the economy more vulnerable, resulting in a reliance on fiscal policy,” she said.

Serey added that as a result of repeated crises, fiscal policy is shrinking in practically every nation. In addition, nations are increasingly dependent on monetary policy to restore economic recovery.

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In the last two decades, she noted that economic stability, particularly with regard to political stability, has contributed to the sustained strengthening of the riel. However, the share of dollar usage has remained high.

“This is consistent with the researchers' findings that when the dollar reaches a high point, it is difficult to reverse,” she said. “It requires both incentive and supporting policies to minimize the level of dollarization usage.”

She said that the Government and NBC have regularly improved public trust in the riel and implemented measures to promote the riel based on market mechanisms since the early 2000s.

In addition, the ratio of riel use over the last two decades has climbed from 0.85 trillion riel to 14.5 trillion, a 16-fold increase, indicating positive signs of change in the use of the national currency, she added.

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‘Cambodia Dollarization: Its Policy Implications for LDCs’ is a joint work between NBC and Japan International Cooperation Agency (JICA), using data collected from households, enterprises, and financial institutions nationwide.

It aims to showcase Cambodia's dollarization history and macroeconomic environment, while providing an in-depth analysis of the impact of dollar circulation on economic activity and the payment system that contributes to the usage of the riel.