Phnom Penh: On the morning of May 28, 2020, HE Ms. Chea Serey, Director General of National Bank of Cambodia led a meeting with representatives of Banking and Financial Institutions on the challenges of US $ 1, US $ 2, and USD $ 5 and the consequences to banks and financial institutions and the National Bank of Cambodia managing these types of bills.
The Meeting discussed and agreed on some of the following challenges:
On the policy aspect:
– In a situation where the world is facing a global health crisis and is entering a recession, strengthening the independence of monetary policy will contribute to more efficient economic growth. In this direction, Cambodia needs to promote a wider use of the Khmer riel, starting with spending on smaller operations. Therefore, keeping the circulation of small US dollar is a barrier to promoting the use of the riel.
– In the last six months, the riel, as well as the local currency, has depreciated significantly against the US dollar. For countries in the region, their depreciation is mainly due to a decline in exports and capital outflows. As for Cambodia, the depreciation of the riel is mainly due to the decline in domestic economic activity and the depreciation of the riel for tax purposes. The depreciation of the riel against the US dollar has a negative impact. Therefore, in order to stimulate the demand for the use of the riel in the economy, especially for smaller transactions, the use of small US dollars should be replaced by the riel.
– The National Bank of Cambodia is the only institution that has the authority to ship foreign currency into Cambodia. Despite its role, the National Bank of Cambodia has streamlined the transfer of US bank notes to Cambodia, particularly for the small and old US dollar bills, and has a hard time controlling the quality, as the export of these notes costs more in labor and money. On the other hand, the foreign partner banks that facilitate the acceptability of small US dollars are smaller, and they are also restricting the receipt of small US dollars denominations, despite high fees. This becomes even more difficult in the face of the global epidemic of COVID-19, which has resulted in fewer flights to and from Cambodia.
– The National Bank of Cambodia will provide 3 months from 1st June, 2020 to 31st August, 2020 to the banks and financial institutions to bring US $ 1, $ 2, $ 5 and US $ 5 bills to the NBC for free shipping overseas
– After August 31, 2020, the National Bank of Cambodia will transfer the cost of shipping overseas on US $ 1, $ 2, $ 5 and $ 5 to the Banking and Financial Institutions. There is no fee for receiving US $ 10 bills and higher..
– The National Bank of Cambodia (NBC) will continue to discuss with banks and financial institutions to come up with an appropriate time frame to suspend the receipt of of smaller US dollars. Also present at the meeting were representatives of some retailers. The NBC also notes that implementation of the above measures does not mean the ban on the circulation of these small US dollars. KBN