Evolution of National Bank of Cambodia’s Monetary Policy

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

- 1954 to 1964: In 1954, Cambodia obtained independence from the French protectorate and founded
the National Bank of Cambodia. The NBC acquired authority of the printing of the
national currency, the riel, as well as the management of Cambodia's banking sector.

- 1975 to 1979: The Khmer Rouge regime led to the closure of Cambodia's National Ba

nk. The building was demolished, the financial system collapsed, and the use of
Khmer riel notes was discontinued.

- 1979 to 1993: The home currency was reintroduced after the civil war ended in 1980, but it was not
widely accepted because people had lost confidence in the currency; rebuilding the
National Bank of Cambodia from the ground up and reissuing the Khmer riel in
circulation Making the transition from a centrally planned to a free market economy.

- 1993 to 1998: The banking system was gradually strengthened and modernized; Privately Owned
and Foreign Subsidiaries and by 1998, 32 commercial banks were licensed.

- 1998 to 2001: Banking Sector Reforms: Introduced under the new Governor H.E. Chea Chanto.
There were now 3 classifications of financial institutions: Full Commercial Banks,
Specialized Banks, and Licensed/Registered Microfinance Institutions (MFIs).

- 2002 to 2008: Extension of the Banking Sector: During those years, the following events
transpired: The Foreign Trade Bank was privatized; New foreign banks arrived
particularly from Australia, Korea, and Japan; Countermeasures set by NBC against
over liquidity given the inflation pressure and the global credit crisis in 2008;
Became a member of Asia Pacific Group (APG) on Anti-Money Laundering and
Combating the Financing of Terrorism; Declared the enforcement of the Law on
Anti-Money Laundering and Combating the Financing of Terrorism; Becoming the
15th member of South-east Asia Central Bank (SEACEN).

- 2009 to 2015: Banking Digitalization: Launching of mobile banking in the early of 2009.
Officially launched the National Payment System in December 2012. The NBC also
installed the Client Module system at its headquarters, connecting 38 members banks
to the National Payment System at the National Clearing House. Developed the
“Shared Switch” system to expand the payment system, to support the integration of
Banks´ ATMs, and to facilitate the payment by mobile phone and internet.

- 2016 to 2017: Launch of the new payment system, called “FAST Payment” to allow customers to
transfer local currency from one bank account to another instantaneously. Launch of
the “Cambodian Shared Switch” and study on gross fast payment system with the
potential accessibility of Digital currencies for inter-bank transactions.
- 2018 to Present: NBC with support of ABC developed the National Payment network using
Blockchain Technology to promote cross-payment and regional transactions. ABC
amended its statutes to encourage the participation from all banking and financial
institutions and payment service providers in Cambodia within the Association.

Reference:
https://www.nbc.org.kh/english/about_the_bank/history_of_nbc.php
https://www.abc.org.kh/history-banking-sector-cambodia

Recent Monetary Policy Developments

Cambodia has made substantial progress over the last two decades, achieving lower middle-
income status in 2015 and aiming for upper middle-income status by 2030. In 2020, the global shock
caused by the COVID-19 pandemic had a substantial impact on Cambodia's economy, at such a
time Cambodia is also facing the partial suspension of preferential access to the EU market under the
"Everything But Arms" initiative. Most of Cambodia's key engines of growth—tourism, manufacturing
exports, and construction—were severely slowed by the outbreak. The pandemic issue has impacted
people's ways of living, communicating, and conducting business, entering a new normal in which
technology is increasingly popular and may serve as a new source of revenue for the economy.
With that. the National Bank of Cambodia has developed new payment methods based on
cutting-edge technology which are becoming increasingly important in facilitating and supporting the
growth of commercial transactions, investments, and international trade. Modernization of payment
systems and adoption of cutting-edge financial technologies would also help to strengthen Cambodia's
digital economy. Bakong, a payment system based on Blockchain Technology, has been internationally
acknowledged as a system that uses the most cutting-edge technology available Bakong is developing
into being the backbone payment system that makes money transfers and settlements between financial
institutions and payment service providers much easier.
For Cambodia to maintain pro-poor growth, create competitiveness, sustainably manage natural
resource wealth, and increase access to, quality of, and equitable access to public services, significant
reforms are required. Cambodia's infrastructure remains very deficient, and it would benefit from
increased connectivity and improvements in rural and urban infrastructure. To fulfill rising labor market
needs, more diversification of the economy would include encouraging entrepreneurship, boosting the use
of technology, and developing new skills. Accountable and responsive public institutions will also be
crucial in satisfying citizens' and the private sector's changing needs.
References:
https://www.nbc.org.kh/download_files/other_reports/english/Macrooutlook_2020_2021.pdf
https://www.worldbank.org/en/country/cambodia/overview#1
Goals of Cambodia's Monetary Policy
Given the government's long-term goal of increasing riel use and eventual de-dollarization the
establishment of sound monetary policy and supporting market infrastructure is imperative over the
coming decade. The National Bank of Cambodia explores new methods to ensure financial stability and
economic growth, create internal capacity, and achieve greater autonomy in formulating and
implementing monetary policy due to a limited range of monetary policy tools. The banking subsector
continues to dominate the financial sector and will continue to be the sector’s most critical segment. With
regard to banking, the priorities are:

 Maintaining monetary and financial stability,

 Addressing constraints in order to accelerate sector development, and
 intensifying resource mobilization and enhancing the efficiency of resource allocation through
development of a money market.
Second Major Role of NBC: financial sector development and stability of the financial system:
Objectives: to support
• Economic stability
• Resource mobilization
• Private sector development
• Employment
• Foreign direct investment
Reference:
https://www.imf.org/external/region/tlm/rr/pdf/Dec07.pdf
https://www.adb.org/sites/default/files/publication/30158/financial-sector-development-strategy-2011-
2020.pdf