Monetary Policy in Cambodia

August 29, 2011 § 2 Comments

The main economic goal of a country is to obtain a sustainable economic growth which required many

factors including a sound and effective government policy. Such policies are monetary policy and fiscal

policy which are manipulated to stimulate the economic growth and stabilize macroeconomic activities

toward a higher standard of living. There is no such difference in Cambodia from other counties that

needs all of these tools especially the monetary policy to guarantee the wellbeing of citizens. Thus, how

does the central bank of Cambodia utilize the monetary policy? And how effective is it? These questions

will be addressed in this essay as a main objective that I attempt to answer.

To begin with, price in the market must be stabilized in order to achieve a short run economic growth, yet

question arisen why price stability is so important. Sustaining a stable price is very important as it is the

goal of macroeconomics since the changes in price will impact the purchasing power of people, interest

rate and exchange rate in the market. For instance, once the price increases in the market or once the

inflation occurs, the consumption will be decreased due to lower purchasing power which will discourage

the firms to produce less according to law of supply. Not only that, but lower money demand also can

increases the interest rate in the banks forcing the firms and households to cut down borrowing money

from the banks. Without the financial supports from the commercial banks, the productions of the firms

particularly have to be reduced and probably stopped. Combing this phenomenon with the appreciation of

domestic currency in account of the higher demand of money, the producers tend not to export their

products to the international market. All of these will cause a tremendous problem to the economy

resulting from the reduction of output produced inside the firms due to the diminishing of consumption,

higher interest and the fluctuation of exchange rate. Consequently, more people will be laid off and

unemployment will rise. More significantly, people will have lower income accompany by lower

consumption and recession or business fluctuation will emerge. In the event that the recession really

occurs, according to John Menard Keynes who is a prominent economist, the government has to take

interventions in order to correct these macroeconomics problems, otherwise recession will transform itself

into depression or great depression which happened in the United State from 1929 to 1941. Such

interventions can be involved with money supply, interest rate and tax policy.

To minimize or avoid from being attacked by economic recession, certain simulations activated by

government must be put in places namely like increasing the money circulation in the market, decreasing

the interest rate or imposing the tax credit. Given that fiscal policy and monetary policy are extremely
important, the Royal Government of Cambodia has strived to develop these tools to be even more

effective. Specially, National Bank of Cambodia has modified and developed new policies in order to

achieve price stability. These policies are reserve requirement policy, exchange rate policy and the

standing facility policy. Each of these policies will be critically discussed separately. Firstly, reserve

requirement plays a vital role in mobilize the fluctuation of money supply in the market. NBC attempts to

facility the mutual benefits both commercial banks and central bank itself through shortening the

maintenance period (base period) for rapid adjustment. Not only that, but the central bank also equipped

itself with new technology of monitoring the bank transactions. Moreover, the NBC has decreased the

reserve requirement to 12 percent in order to promote higher credits and borrowing. This policy is

essential to response to the recent influence of economic crisis. As a result, more investment will appear

and employment opportunities will also be available for Cambodian people. More jobs will translate into

higher income and higher standard of living.

Following the strengthening of reserve requirement policy, NBC has also put in place the exchange rate

policy in order to avoid the speculative attack and extreme fluctuation of exchange rate. The fluctuation of

exchange rate is very dangerous and vulnerable to the economy since its impact can crowd out the

investment. When the domestic exchange rate appreciated, firms or producers tend not to export their

products to the international market due to lack of competitive advantage in price. This will also

encourage more imports which afterward lead to balance of payment deficit. Trade deficit will be a great

challenge for NBC as it undermines the foreign reserve. NBC must have sufficient foreign and domestic

reserves so that it can intervene on time and at the right time.

Furthermore, another instrument NBC utilizes is standing facility. Such facilities are fixed deposit facility,

overdraft facility and refinancing window facility. Fixed deposit facility allows other financial institutions to

manage their short term liquidity and this facility acts as a replacement for interbank market which is

unavailable in Cambodia. Secondly, the overdraft facility also contributes and assists other commercial

banks to avert and overcome the short term liquidity shortages. In other words, this facility helps other

banks to have sufficient money to meet the sudden withdrawal of customers. Last but not least, currency

swap or refinancing window provide avenue for other financial institutions to escape from the risk of

fluctuation in exchange rate and to offer agricultural loan to Cambodian farmers. The purpose of these

facilities is obvious that NBC has the intention to control the money circulation flowing to the market and

to improve the banking system to be more reliable and effective in term of liquidity. This is significant as

banks, the financial intermediary, offers more investment opportunities for Cambodia.
In addition, to foster an efficient and effective control of money supply and credit in the economy,

Cambodia needs a strong financial market, stock market. This market allows NBC to stimulate the money

circulation through purchasing or selling bond to households or firms. This method is very popular in the

United States since federal government can stabilize price effectively. Cambodia, however, has some

constraints concerning the effectiveness of stock market due to lack of public confidence and dollarized

economy. Dollarization lends to the difficulty of implementing the monetary policy in an effective manner

since most business transactions in Cambodia is manipulated in foreign currency, that’s it, US dollar.

Consequently, to promote the effectiveness of monetary policy, Cambodian government has to promote

the value of its currency and encourage people to use domestic currency as a main medium of exchange.

In conclusion, monetary policy is a critical instrument that NBC utilizes to stabilize the economy toward a

higher employment, lower inflation and a better living standard of people. Yet monetary policy must be

effective, sufficient and sound as without these factors, this policy will not stimulate the economic growth

and sustain economic development. As a result, prosperity and wellbeing of people will translate into a

better Cambodia in the next decade.

Overview

The National Bank of Cambodia (NBC), the nation's central bank, is the monetary and supervisory

authority. The mission of the NBC is to determine and direct the monetary policy aimed at maintaining

price stability in order to facilitate economic development within the framework of the kingdom's economic

and financial policy. The NBC conducts this in consultation with the Royal Government and in
consideration of the framework of the economic and financial policy of the kingdom. As the monetary

authority, the NBC is the sole issuer of the Khmer riel, the national currency. In doing so, this helps

maintain monetary stability. 

 Through prudent conduct of monetary policy, inflation has been managed at low rate with an annual

average of less than 5 percent, which is appropriate for developing countries. However, in the context of a

highly dollarized economy, the effective conduct of monetary policy is constrained and the National Bank

of Cambodia loses its ability to act as the lender of last resort. Currently, the monetary policy instruments

used to achieve price stability is setting reserve requirement rate and conducting foreign exchange

intervention. At the same time, the National Bank of Cambodia is developing additional monetary policy

instruments to enhance monetary policy effectiveness through issuing Negotiable Certificates of Deposit

(NCDs), developing interbank and monetary markets, promoting the use of riel, and so on.

As the supervisory authority, the NBC has the authority to license, delicense, regulate and supervise

banks and financial institutions in Cambodia. The NBC also conducts regular economic and monetary

analysis, publishes various publications, oversees the nation's payment systems, establishes balance of

payments, and participates in the management of external debt claims.

Structure

The board of directors is the highest decision making body of the NBC and consists of five

representatives from government, academia, the private sector, and NBC staff. The Governor is the

Chairman of the board and serves as the Chief Executive Officer of the central bank, reports to the board,

and is responsible for implementing the policy and conduct of day-to-day operations. The Governor is

appointed, replaced, and dismissed by a royal decree on the recommendation of the Royal Government.  

At the operational level there are five divisions that are responsible for executing the day to day functions

of the NBC's central banking operations which are divided into the following: Secretariat General,

Directorate General of Central Banking, Directorate General Supervision, Cash General and Inspector

General. There are 21 departments that are supervised by a director, which implements NBC policy on a

day to day basis.

Board of Directors

The board of directors is the highest decision making body of the National Bank of Cambodia.

The board consists of seven members. The Governor is the Chairman of the board and serves as

the Chief Executive Officer of the central bank, reports to the board, and is responsible for

implementing the policy and the conduct of day-to-day operations. The Governor is appointed,

replaced, and dismissed by a royal decree on the recommendation of the Royal Government. The

board holds meetings not less than once every two months.

CHAIRMAN

H.E. CHEA CHANTO

 Governor of the National Bank of Cambodia

H.E. CHOU KIMLENG

H.E. NEAV CHANTHANA
Representative of Head of the Royal
Deputy Governor of the National Bank of
Government
Cambodia

H.E. ROS SEILAVA H.E. IV THONG

Representative of the Ministry of Economy and Representative of Academia

Finance

Mrs. MAO SON

Mr. LAY MENGSUN
Representative of the National Bank of
Representative from the Private Sector
Cambodia Staff

Branches

The National Bank of Cambodia's headquarters is in Phnom Penh, the capital of Cambodia. The
NBC has 21 branches in 25 provinces and cities. There are a total of 1,384 staff in total with 979

in headquarters and 405 in provinces. Below are the list of branches and contacts for your

information. 

All - Phnom Penh - Kandal - Kampong Cham - Battambang - Prey Veng - Siem

Reap - Kampong Thom - Takeo - Pursat - Kampong Chhnang - Kampong
Spue - Kampot - Sihanoukville - Koh Kong - Preah
Vihear - Kratie - Ratanakiri - Mondulkiri - Stung Treng -Banteay Meanchey - Svay Rieng

National Bank of Cambodia - Phnom

Penh Branch

Address : #273 , Street 110-67, Sangkat

Wat Phnom, Khan Daun Pehn, Phnom

Penh, Cambodia.

Tel : (855-53) 223 741

Fax : (855-23) 223 745

National Bank of Cambodia - Siem

Reap Branch

Address : Street 9-10, Mondul 1 , Khum

Svay Dangkum, Srok , Siem Reap

Province, Cambodia.

Tel : (855-63) 963 534

Fax : (855-63) 963 534

National Bank of Cambodia -

Kampong Cham Branch

Address : Street Preah Monivong,

Khum-Srok Kampong Cham , Kampong

Cham Province, Cambodia.

Tel : (855-42) 941 958

Fax : (855-42) 941 958

National Bank of Cambodia -

Kampong Chhnang Branch

Address : Street Norodom, Phum Klang

Prak, Khum Phaei, Srok Kampong

Chhnang , Kampong Chhang Province,

Cambodia.

Tel : (855-26) 988 674

Fax : (855-26) 988 674

National Bank of Cambodia -

Battambang Branch

Address : #70 - 71, Street 1, Phum 20

Ousaphea, Sangkat Svaypor, Krong

Battambang , Battambang Province,

Cambodia.

Tel : 855-53) 941 958

Fax : (855-23) 730 166

National Bank of Cambodia -

Kampong Speu Branch

Address : National Road No 4, Phum

Peanichkam , Khum Rokarthom, Srok

Chbar Mon, Kampong Speu Province,

Cambodia.

Tel : (855-25) 987 214

Fax : (855-25) 987 214

National Bank of Cambodia - Koh

Kong Branch

Address : Street Matprek, Phum 1,

Khum-Srok Smach Meanchey, Koh

Kong Province, Cambodia.

Tel : (855-35) 936 210

Fax : (855-35) 936 210

National Bank of Cambodia - Kratie

Branch

Address : Street Kosamak, Phum Kratie,

Srok Kratie, Kratie Province, Cambodia.

Tel : (855-72) 971 695

Fax : (855-72) 971 695

National Bank of Cambodia -

Ratanakiri Branch

Address : Street 78, Phum 1, Khum

Labanseak, Srok Banlung, Ratanakiri

Province, Cambodia.

Tel : (855-75) 974 173

Fax : (855-75) 974 173

National Bank of Cambodia -

Mondulkiri Branch

Address : Phum Svay Cheik, Khum

Sokadom, Srok Sen Monorum,

Mondulkiri Province, Cambodia.

Tel : (855-12) 656 070

Fax : N/A
National Bank of Cambodia - Svay

Rieng Branch

Address : Phum Suon Thmey, Khum

Prek Chhlak, Srok Svay Rieng, Svay

Rieng Province, Cambodia.

Tel : (855-44) 945 989

Fax : (855-44) 945 989

National Bank of Cambodia - Banteay

Meanchey Branch

Address : Blok Uy, Phum 3, Khum Preah

Punlear, Srok Serei Sophoan, Banteay

Meanchey Province, Cambodia.

Tel : (855-54) 710 169

Fax : (855-54) 710 169

National Bank of Cambodia - Stung

Treng Branch

Address : Street 2, Phum Prek, Khum-

Srok Stung Treng, Stung Treng

Province, Cambodia.

Tel : (855-74) 973 906

Fax : (855-74) 973 906

National Bank of Cambodia -

Kampong Thom Branch

Address : Street Stung Sen, Phum 1,

Khum Kampong Thom, Srok Stung Sen ,

Kampong Thom Province, Cambodia.

Tel : (855-62) 961 309

Fax : (855-62) 961 309

National Bank of Cambodia - Pursat

Branch

Address : Street 1, Phum PealNhek,

Sangkat Ptas Prey, Krong Pursat, Pursat

Province, Cambodia.

Tel : (855-52) 951 481

Fax : (855-52) 951 481

National Bank of Cambodia - Takeo

Branch

Address : Street 11, Phum 1, Khum

Rokarknong, Srok Donkeo , Takeo

Province, Cambodia.

Tel : (855-32) 931 327

Fax : (855-32) 931 327

National Bank of Cambodia - Kampot

Branch

Address : Street Matprek, Phum 1

Ousaphea, Khum Kampong Kandal,

Srok Kampong Bay, Kampot Province,

Cambodia.

Tel : (855-33) 932 830

Fax : (855-33) 932 830

National Bank of Cambodia - Prey

Veng Branch

Address : Street Matonlei, Phum 3,

Khum-Srok Kampong Leav , Prey Veng

Province, Cambodia.

Tel : (855-43) 944 556

Fax : (855-43) 944 556

 National Bank of Cambodia - Kandal

Branch

Address : Street 104, Phum Takmao,

Khum-Srok Takhmao, Kandal Province,

Cambodia.

Tel : (855-23) 425 664

Fax : (855-23) 425 664

National Bank of Cambodia - Preah

Sihanoukville Branch

Address : Street Pokambor, Sangkat 3,

Khan Mitapheap, Preah Sihanoukville

Province, Cambodia.

Tel : (855-34) 933 649

Fax : (855-34) 933 649

National Bank of Cambodia - Preah

Vihear Branch

Address : Street 2, Phum Kandal, Khum

Kampong Pronark, Srok Tbeng

Meanchey, Preah Vihear Province,

Cambodia.

Tel : (855-12) 952 035

Fax : N/A

History

The National Bank of Cambodia has a rich and complex history which can be divided into four
distinct periods. 

- 1954 to 1964: Cambodia gained independence from the French protectorate in 1954 and the
National Bank of Cambodia was established. The NBC gained autonomy of
printing riel as the national currency as well as managing the banking system
in Cambodia. 

- 1975 to 1979: The National Bank of Cambodia was closed due to the Khmer Rouge regime.
The building was destroyed, the banking system collapsed, and the use of
Khmer riel notes was eliminated. 
- 1979 to 1993: Rebuilding the National Bank of Cambodia from scratch and reissuing of the
Khmer riel in circulation. Transitioning from a centrally planned economy to
a free market economy. 

- 1993 to Present: Gradually the banking system was strengthened and modernized and
Cambodia becomes one of the strongest growing economies in the world.

INDEPENDENCE AND ESTABLISHMENT (1954-1964) 

The National Bank of Cambodia was established on December 23, 1954, after the country gained
independence from the French Protectorate and after the Institut d Émission (the printing house
for the three Indochine countries was closed).

Banking Terms

ATM: Automated Teller Machines (ATMs) are used to conduct transactions with the bank electronically.
In short, ATM is cash dispenser. 

ATM Card: ATM card is the card that can be used at ATMs for transactions like account balance inquiry,
cash withdrawal, and other service. It is similar to the debit card since the card is directly connected to a
bank account, however it cannot be used for purchasing purposes. 

ASEAN Economic Community: shall be the goal of regional economic integration by 2015. AEC
envisages the following key characteristics: (a) a single market and production base, (b) a highly
competitive economic region, (c) a region of equitable economic development, and (d) a region fully
integrated into the global economy. 

Asian Development Bank: Asian Development Bank (ADB), based in Manila, Philippines, was
established in 1966 to help accelerate economic and social development and dedicated to reducing
poverty in Asia and the Pacific region through loan, grants, economic research, policy and technical
assistance. 

Balance of Payment (BOP): is a statistical statement that summarizes transactions between residents
and nonresidents during a period. It consists of the current account, the capital account, and the financial
account. 
Broad Money: defined as the sum of the currency held by the public and all deposits held by the public
with commercial bank. 

The Central Bank: The entity responsible for overseeing the monetary system for a nation (or group of
nations). Central banks have a wide range of responsibilities, from overseeing monetary policy to
implementing specific goals such as currency stability, low inflation and full employment. Central bank
also generally issue currency, function as the bank of government, regulate the credit system, oversee
commercial banks, manage, exchange reserves and act as a lender of last resort. 

Check: A check is an unconditional order in writing, addressed to a banker and signed by the person
giving the order, requiring the banker to pay a determined sum of money to the order of a specified
person or to the bearer. It must be payable at sight and conform to all requirements stated in Law on
Negotiable Instruments and Payment Transactions. 

Clearing House: The clearing house is a place where the representatives of the different banks meet for
confirming and clearing all the checks and balances with each other. The clearing house, in most
countries across the world, is managed by the central bank. 

Credit Card: a card that which allows cardholder to borrow money from the bank and to buy goods up to
a certain limit without paying for them immediately, but only after a period of grace of about 25-30 days. 

Credit Remittance: Typically used for making payment originated by the payer to the beneficiary.
Commercial banks provide credit remittance via branch, ATM, Internet, PC, and mobile. 

Debit Card: A payment card that deducts money directly from a consumer’s account to pay for a
purchase. It can also allow cardholders to withdraw cash from their deposit account through ATM,
especially acting as the ATM card. 

Direct Credit: in banking, a direct deposit (or direct credit) is a deposit of money by a payer directly into a
payee’s bank account. Direct deposits are most commonly made by business in the payment of salaries
and wages for the payment of suppliers’ accounts, but for facility can be used for payments for any
purpose, such as payment of bills, taxes, and other government charges. 

Direct Debit: a system where a customer allows a company to charge costs to his or her bank account
automatically and where the amount charged can be increased or decreased with the agreement of the
customer. 

Electric Payment Order: Electronic payment order means an instruction given to a bank to pay or collect
a specific sum of money out of a designated account, to or for a payee, or to or for a payee’s account,
and includes any amendment to a payment order. It may be value-dated but not be subjected to a
condition other than as the originating bank agreed to perform. Parties to a payment order are the sender
and the receiving bank. 

Exchange Rate: An exchange rate is a price of nation’s currency in term of another currency. An
exchange rate can be quoted as follows: 

- In a direct quotation: the price of a unit of foreign currency is expressed in terms of the domestic
currency. 
- In an indirect quotation: the price of a unit of domestic currency is expressed in terms of the foreign
currency. 

Foreign Exchange Reserves: are foreign currency assets held by the central bank of countries. These
assets include foreign marketable securities, monetary gold, special drawing rights (SDRs) and reserve
positions in the International Monetary Fund. The main purpose of holding foreign exchange reserves is
to make international payments and hedge against exchange rate risk. 

Inflation: is defined as a sustained increase in the general level of prices for goods and services in an
economy over period of time. It is calculated in percentage and also measured as a monthly, quarterly,
and annual percentage increase. 

Interbank Money Market: a market where banks lend to or borrow from each other. 
Interest Rate: An interest rate is the rate at which interest is paid by borrowers (debtors) for the use of
money that they borrow from lenders (creditors). Interest rates are normally expressed as a percentage of
the principal for a period of one year. 

International Monetary Fund: an international organization created in 1945 for the purpose of promoting
international financial stability and monetary cooperation; facilitate international trade, promote high
employment and sustainable economic growth, and reduce poverty around the world. 

Japan International Cooperation Agency: An Organization created in 2003) to contribute to the

promotion of international cooperation as well as the sound development of Japanese and global
economy by supporting the socioeconomic development, recovery or economic stability of developing
countries. 

Lender of last resort: The function of a central bank in extending credit to banks to overcome liquidity
problems caused by a mismatch in funds and to prevent liquidity crisis. 

Liquidity: The degree to which an asset or security can be bought or sold in the market without affecting
the asset's price. Assets that can be easily bought or sold are known as liquid assets. The ability to
convert an asset to cash quickly. 

Microfinance Institution: An institution specializing in delivery of financial such as loan and deposits, to
the, to the poor and low income households, and to micro-enterprises. 

Monetary Policy: the process by which the monetary authority of a country controls the supply of money,
often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.
Further goals of a monetary policy are usually to contribute to economic growth and stability, to lower
unemployment, and to predict exchange rates with other currencies. 

Monetary Policy Committee: a high-level policy committee at the National Bank of Cambodia,
established to assess the ongoing economic and financial developments of the country and to make
decisions on monetary policy, with the objective of maintaining price stability. 

National Bank of Cambodia: The central bank of Cambodia. 

Negotiable Certificate of Deposit: NCD is a short-term interest bearing debt issued by the central bank
denominated in Khmer Riel or US Dollar with equivalent minimum amount of 2,000 million Riel. 

Official Exchange Rate Determination Committee: The NBC's exchange rate is determined by the
NBC's Official Exchange Rate Determination Committee, which is comprised of staff from relevant
departments such as; Issue, Banking Operations, Exchange Management, Statistics, and Economic
Research & International Cooperation Department 

Payment card: Payment card covers a range of different cards that can be presented by a cardholder to
make a payment. There are four types of payment cards; credit card, debit card, ATM card and prepaid
card. 

Payment System: According to the definition by the Bank for International Settlement (BIS), a payment
system consists of a set of instruments, banking procedures, and typically interbank funds transfer
systems that ensure the circulation of money. It is generally known as the means by which funds are
transferred by the system participants. In other words, there are components related to payment systems
which include (1) legal and regulatory framework issued by the relevant authorities, mainly central banks
(2) institutions participating in the operation of the payment systems which consists of banks, non-bank
financial institutions, non-bank providers of fund transfer services, switching companies, and even central
banks (3) payment instruments and clearing and settlement mechanisms in the system, which are used to
transfer the funds in order to discharge the obligation arising from economic activities. 

Prakas: A regulation issued adopted by minister or central bank governor. It must conform to the
Constitution and to the law or sub-decree. 

Prepaid Card: Payment card means a card where the money is replenished by depositing on a virtual
account related to that card, and that amount of money can be spent at any participating stores. In some
cases, the card is designed exclusively for use on the Internet, and so there is no physical card. Typical
applications of a prepaid card include phone cards, gift cards, and travel cards. 
Price Stability: A situation in which prices in an economy don't change much over time. Price stability
would mean that an economy would not experience high inflation or deflation. 

Reserve Requirements: the amount of deposits that commercial bank must keep in the form of vault
cash or deposits with Central Bank. Central bank is the regulator imposing reserve requirement. The main
purpose of Reserve requirement is to control growth in the money supply. Central bank uses reserve
requirement as a tool to control liquidity in the market. A low reserve requirement allows more money in
the banking system. A high reserve requirement allows less liquidity. 

Riel: The national currency of Cambodia. 

Volatility: The relative rate at which the price of a security moves up and down. Volatility is found by
calculating the annualized standard deviation of daily change in price. If the prices of securities move up
and down rapidly over short time periods, it has high volatility. If the price almost never changes, it has
low volatility. 

Yield: The rate of income generated from a stock in the form of dividends, or the effective rate of interest
paid on a bond, calculated by the coupon rate divided by the bonds market price. Furthermore, for any
investment, yield is the annual rate of return expressed as a percentage. 

World Bank Group: Five international organizations dedicated to providing financial assistance and
advice to countries struggling with poverty and economic development. The World Bank generally
focuses on developing third-world countries, helping them in areas such as health, education and
agriculture. This bank provides loans and grants at discounted rates to these countries.
Monetary Policy
Overview

The principal mission of the National Bank of Cambodia is to determine and direct the monetary policy

aimed at maintaining price stability in order to facilitate economic development, within the framework of

the country’s economic and financial policy. Through prudent conduct of monetary policy, inflation has

been managed at low rate with an annual average of less than 5 percent, which is appropriate for

developing countries. However, in the context of a highly dollarized economy, the effective conduct of

monetary policy is constrained and the National Bank of Cambodia loses its ability to act as the lender of

last resort. Currently, the monetary policy instruments used to achieve price stability is setting reserve

requirement rate and conducting foreign exchange intervention. At the same time, the National Bank of

Cambodia is developing additional monetary policy instruments to enhance monetary policy effectiveness

through issuing Negotiable Certificates of Deposit (NCDs), developing interbank and monetary markets,

promoting the use of riel, and so on.

Monetary Policy Committee

The Monetary Policy Committee, a high-level policy committee at the National Bank of Cambodia The

MPC meets four times a year on a quarterly basis. Before the meeting, the secretariat team, comprised of

economists and other staff from the Economic Research & International Cooperation Department and

Statistics Department, will prepare a detailed analysis and report for the MPC. Based on that report, the

MPC will discuss and evaluate different aspects of the economy, covering key economic and financial

developments since the last meeting. The MPC will combine this analysis with their judgment and

prediction on the likely course of the economy and price in the period ahead, and then decide on the

policy options in order to ensure long-term price stability. 

Monetary Policy Committee (MPC) Members: 

H.E. Chea Chanto Governor Chair

H.E. Sum
Deputy Governor Vice-chair
Sannisith
H.E. Ou Chandara Secretary General Member
H.E. Chea Serey Director General of Central Banking Member
H.E. Rath
Director General of Banking Supervision Member
Sovannorak
Mr. Kimty
First Deputy Director General of Central Banking Member
Kormoly
Mr. Kith Deputy Director General of Banking Supervision and Director
Member
Sovannarith of On-site Supervision Department
Deputy Director General of Central Banking and Director of
Permanent
Mr. Khou Vouthy Economic Research and International Cooperation
Member
Department
Mr. Chhim
Director of Issue Department Member
Chankosal

Exchange Rate Policy

The National Bank of Cambodia's exchange rate policy is one of the key tools in the NBC's
monetary policy. The objective is to achieve price stability. Continuing to implement the
managed floating regime, the NBC will intervene in the Foreign Exchange Market to maintain
the exchange rate in accordance with the determined objective. 

The NBC's official exchange rate represents the bidding and asking prices of foreign exchange
rates against the KHR for NBC transactions with third parties, and is a benchmark for the private
sector. 

The NBC sets the exchange rate by: 

• The exchange rate is determined by the NBC's Official Exchange Rate Determination
Committee, which is comprised of staff from relevant departments such as; Issue, Banking
Operations, Exchange Management, Statistics, and Economic Research & International
Cooperation Department. 

• The committee meets every morning to set the official daily exchange rate by analyzing the
internal and external data. The Exchange rate will then be published every working day after
approval from the Director General of Central Banking. 

• When the exchange rate is volatile and out of the determined range, the committee may hold an
urgent meeting to discuss new strategies and approaches. 

Reserve Requirements
Reserve Requirement is one of the monetary policy instruments used by the National Bank of
Cambodia in order to control the speed of credit growth. Currently, the reserve requirement rate
for foreign currency (esp. USD) and local currency have been treated differently. The reserve
requirement rate in foreign currency and domestic currency are set at 12.5 percent and 8 percent,
respectively. The National Bank of Cambodia has offered interest rates on the 4.5 percent of
reserve requirement in foreign currency, while the remaining 8 percent is not offered interest. No
interest is offered to the reserve requirement in riel.

Negotiable Certificate of Deposits

A securities market in Cambodia is in the early stages of development due to: (i) the lack of tradable
instruments, such as government securities, that could pave the way for the development of interbank
market; (ii) the absence of market makers and a network of intermediaries; and (iii) the lack of a
benchmark rate against which securities could be priced when they are issued. 

Due to these reasons, the National Bank of Cambodia has set up an interbank market development
project by issuing Prakas B-5-010-183 dated October 15, 2010 on The Issuance of Tradable Securities by
the NBC. The goals of the interbank market development project are: 

   -To promote the interbank lending on secured basis. 

   -To have more effective instruments for pursuing monetary policy and foreign exchange objectives. 
   -To reallocate financial resources among financial institutions and boost financial intermediation. 
   -To respond to the market needs for: 

Investing temporary excess liquidity. Currently there is no alternative ways for banks to manage their
excess liquidity. 
Lessening the banks’ reliance on depositors’ funds to meet their temporary short and medium liquidity
needs. 
Mitigating the risk associated with liquidity management and interbank lending. After 3 years of
preparation, the NBC officially launched its interbank market project on September 09, 2013. 

BACKGROUND 

A Negotiable Certificate of Deposit (NCD) is a short-term interest bearing debt issued by the National
Bank of Cambodia. It is issued in Khmer riel and U.S. dollar in order to help commercial banks and
microfinance institutions invest their short term liquidity. The minimum denomination for investment is
KHR 200,000,000 or USD 50,000. The maturity of the KHR-NCD ranges from 2 weeks to one year,
whereas the maturity of the USD-NCD ranges from 2 weeks to 6 months. The interest rate of NCDs is
determined by the NBC and varies everyday according to market conditions. 

The advantages of holding an NCD include: 

No Credit Risk: Because NCDs are issued by the NBC (supported by Prakas B-5-010-183 the Issuance of
Tradable Securities), there is no credit risk associated with the investment. 

Interest Earned: NCDs are an interest bearing instrument, therefore banks who invest their excess
reserves in NCDs will earn interest, which will be paid on the maturity date to the current account of the
NCD’s owner opened at the NBC. The interest on NCDs is comparably higher than that of term deposits.
Interest will be calculated in the following manner: 

Interest = Prt 
Where: 

- P is the principal amount 

- r is the annual interest rate expressed as a percentage divided by actual number of days in each year 
- t is the NCD’s tenor. 

Highly Liquid: NCD is a short term instrument, risk free, and issued by the central bank, therefore it can
be traded in a highly liquid secondary market. 

In the interim period, the NBC can repurchase NCDs at a discount price if the NCD’s owner is facing
difficulties in finding counterpart.

The repurchased formula which will be used to buy the NCD back is: 

Transferrable: The NCD’s owner can transfer it to any party at any time in the interbank market. The
NBC will transfer the ownership once it receives the notification from the buyer and seller. 

Collateralized: NCDs can be used as collateral for the credit facility from NBC and in the interbank
market. 

Though there are many benefits of investing in NCDs, potential investors should also be aware that: 

• Maturity of an NCD is determined by the NBC as such, investors may not be able to invest funds in a
required maturity as they would like. 

• The interest rate is determined by the NBC and fixed for the whole term of the NCD; therefore
investors are unable to get a higher interest rate if the market rate rises. 

• Any request to sell the NCD back to the NBC is subject to the NBC’s discretion. The NBC encourages
investors to sell the NCD on the interbank market. 

• The price at which NCDs will be purchased back is subject to the holding period and the NBC’s discount
rate. 

• At the time of investment, the investor may face interest rate risk as a result of market volatility.

Procedures

1. NCD Custodian Account Opening: 

In order to open a NCD Custodian Account, banks and financial institutions need to provide the following
required documents: 
• Application Form Opening Custodian Account 
• Authorized letter 
• 3 Copies of Specimen Signature (Available at Securities Management Division) 
• Other copied documents such as: 
- Memorandum and Article of Associations 
- License 
- Passport or National ID card of Account Holders and Authorized Persons 

2. NCD Subscription: 
Once a customer has opened a custodian account, they can now subscribe to an NCD. The subscriber
needs to provide the Securities Management Division of Banking Operations Department at the NBC as
follows: 
• Application for Subscription Tradable Securities 
• Payment Instruments such as Check or Transfer Order 

3. Ownership Transfer: 
NCD Ownership Transfer occurs when the sale of NCDs is straight forward, pledged as collateral or
Repurchased Agreement (REPO) between NCD’s holders with the other banks and financial institutions
which have opened their Custodian Account at the NBC. 

These transactions may occur in two cases: 

1. Settlement through the NBC: Both Parties must provide an Application for Ownership Transfer of
Tradable Securities to the Securities Management Division of the Banking Operations Department at the
NBC. The buyer must issue the payment instrument as check or transfer order to pay seller for
transferring this amount of money to seller’s current account at the NBC. 

2. Settlement outside of the NBC: Both Parties must provide Change Ownership Application Forms to the
Securities Management Division of the Banking Operations Department, three working days (at the
latest) after the agreement. 
4. Selling NCDs Back to the NBC: 
The NBC may buy issued NCDs back which are not matured by calculating the Repurchasing Price based
on the Repurchasing Rate, which is published daily on the NBC website. The NCD holder must provide
the NCD Selling Back Application Form to the Securities Management Division of the Banking Operations
Department. 

-The Repurchasing Price will be calculated by using the discounting method: 

The repurchased formula which will be used to buy the NCD back is: