Liquidity in Riel Currency Rises More Than 83%
According to the National Bank, the issuance of NCD in riel declined by 15.2%, to 5.9 trillion riel, and the dollar by 74.8%, to $4.1 billion in the first six months of 2023. Photo: Ou Sokmean
- By Ou Sokmean
- August 9, 2023 11:53 AM
PHNOM PENH – The issuance of liquidity in riel to the banking and microfinance system increased by 83.8% through the Liquidity-Providing Collateralized Operation (LPCO) in the first half of this year, compared to the same period last year.
The issuance aims to fill the riel currency use in the market, according to the National Bank of Cambodia (NBC).
The issuance of the Negotiable Certificate of Deposit (NCD) in riel and dollar currency has decreased while the liquidity issuance in riel through the LPCO has increased remarkably.
According to the National Bank, the issuance of NCD in riel declined by 15.2%, to 5.9 trillion riel, and the dollar by 74.8%, to $4.1 billion in the first six months of 2023.
While the issuance of the liquidity of 1.5 trillion riel increased by 83.8%, the liquidity less than 1.5 trillion riel rose by 41.9% in the first half this year.
The NBC issues the liquidity in riel for bids every two weeks to supply the riel currency in the market, with an acceptable rate — which is similar to last year — because the banking and financial institutions need riel currency.
The average rate for the bid is at 5.6%, of which the rate for the 91-day maturity is 5.5% while that for the 182-day maturity is 6.1% and the 364-day maturity is 5.1%.
The Negotiable Certificate of Deposit (NCD) and the Liquidity-Providing Collateralized Operation (LPCO) are two of the monetary policy tools of the National Bank, used to respond to the increasing demand for riel currency in the market.
The NCD is a tool that the NBC uses to allow financial institutions to safely deposit in riel and dollar currencies for a short period or a medium term to receive the rate. The NBC will issue the cash in riel currency in the market through the LPCO at the right time.
The purpose of LPCO is to create a benchmark rate for the market to support the monetary policy implementation, boosting the demand in NCDs — which is a tool guaranteeing in the international market — as well as encouraging the use of riel currency to support the agriculture sector and contribute to lowering the rate in riel which is currently high.
Chea Serey, the newly appointed governor of the National Bank of Cambodia, said that the demand for riel currency will increase if there is a greater demand for the LPCOs because the NBC will be able to get more dollars from banking and financial institutions and release more riel in the market.
Among the banking and financial institutions that bid for the LPCOs, there is also the ACLEDA Bank. Mar Amara, the bank’s executive vice president and group chief financial officer, said the bank’s contribution to the bid is to boost the use of riel currency in the bank operation.
The ACLEDA acquired from the National Bank is used for providing loans to customers and payments through KHQR.
“This is an important factor in joining us in accordance with the main mission of the National Bank of Cambodia to set and lead monetary policy to maintain price stability to contribute to economic development within the political, economic and financial framework,” she said.
Originally written in Khmer for ThmeyThmey, this story was translated by Meng Seavmey for Cambodianess.
