The National Bank of Cambodia has launched many initiatives to boost and circulate more riels – but with US dollars making up more than 80 percent of the economy, the question remains whether investors will retain confident in a de-dollarised Cambodian economy or not. While dollarisation has positives and negatives in any emerging economy, Jayant Menon, visiting Senior Fellow of ISEAS in Singapore and former lead economist of  the Asian Development Bank, explains the main negatives are loss of seigniorage, loss of control over an independent monetary policy and the exchange-rate policy. However, the positives are increased confidence in the economy, lower inflation and macro stability.

 

 

“De-dollarisation will be a good thing for Cambodia in the long run, but it has to happen naturally and cannot be legislated or forced. This is because dollarisation is not the problem, but merely a symptom,” Menon said. Menon added that the problem (or the cause) is a lack of confidence in the riel, whilst the symptom (or the effect) is the use of another currency such as the US dollar. The causes of the problem generally emanate from an underdeveloped monetary system, political and economic uncertainty and weak legal and institutional structures.

 

read more https://www.khmertimeskh.com/50705014/will-investors-remain-confident-in-a-de-dollarised-cambodian-economy/

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