Confusion in Cambodia about planned phaseout of small dollar notes

A surprise announcement by Cambodia’s central bank on May 29 that it plans to phase out the circulation of small-denominated US dollar bills has caused confusion for businesses, street vendors and consumers alike in the country.

The National Bank of Cambodia (NBC) in a press release said it would phase out $1, $2 and $5 bills in a move to push the use of Cambodia’s domestic currency, the riel. The statement was released after a meeting of central bank officials with representatives of the ministry of finance.

The NBC said it is giving a three-month deadline from June 1 to August 31 for all commercial banks and microfinance institutions to collect the small bills and exchange it at the central bank in local currency. The dollar notes would then be brought out of the country.

According to the central bank, the move is aimed at strengthening the independence of Cambodia’s monetary policy and also to get more control about the valuation of the riel which hovered in a small and stable band around 4,000 riel per US in the past decades.

However, as of recently, the riel has started to depreciate against the US dollar because of a fall in demand for the currency in the market as a result of a slowdown in economic activities and a decrease in paying taxes in riel, the NBC said.

From a practical viewpoint, the central bank also seeks to reduce the handling of small US dollar bills which are often old, torn and worn and its foreign bank partners have become resistant to accepting them.

First step to de-dollarise Cambodia’s economy

Economists in Cambodia are widely welcoming the move, seeing it as a first step to the de-dollarisation of the country’s economy and the setup of an autonomous monetary policy.

On the other hand, businesses and consumers expressed confusion over whether the central bank’s announcement would lead to an outright ban of small US dollar bills, with some vendors already refusing to accept such notes.

The government and financial institution were then quick to release statements ensuring that small denominated US dollar bills were still legal tender and that people could continue using them and bring them in and out of the country.

“The $1, $2 and $5 notes are still ordinarily used in Cambodia,” Prime Minister Hun Sen said in a post on Facebook, adding that there was “no prohibition like rumor being spread.”

Financial experts say that the effects will only appear over time as the number of small US dollar bills in circulation will shrink and people will use the riel more often instead and small businesses which use small denominations the most will have enough time to adjust.



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A surprise announcement by Cambodia’s central bank on May 29 that it plans to phase out the circulation of small-denominated US dollar bills has caused confusion for businesses, street vendors and consumers alike in the country. The National Bank of Cambodia (NBC) in a press release said it would phase out $1, $2 and $5 bills in a move to push the use of Cambodia’s domestic currency, the riel. The statement was released after a meeting of central bank officials with representatives of the ministry of finance. The NBC said it is giving a three-month deadline from June 1 to...

A surprise announcement by Cambodia’s central bank on May 29 that it plans to phase out the circulation of small-denominated US dollar bills has caused confusion for businesses, street vendors and consumers alike in the country.

The National Bank of Cambodia (NBC) in a press release said it would phase out $1, $2 and $5 bills in a move to push the use of Cambodia’s domestic currency, the riel. The statement was released after a meeting of central bank officials with representatives of the ministry of finance.

The NBC said it is giving a three-month deadline from June 1 to August 31 for all commercial banks and microfinance institutions to collect the small bills and exchange it at the central bank in local currency. The dollar notes would then be brought out of the country.

According to the central bank, the move is aimed at strengthening the independence of Cambodia’s monetary policy and also to get more control about the valuation of the riel which hovered in a small and stable band around 4,000 riel per US in the past decades.

However, as of recently, the riel has started to depreciate against the US dollar because of a fall in demand for the currency in the market as a result of a slowdown in economic activities and a decrease in paying taxes in riel, the NBC said.

From a practical viewpoint, the central bank also seeks to reduce the handling of small US dollar bills which are often old, torn and worn and its foreign bank partners have become resistant to accepting them.

First step to de-dollarise Cambodia’s economy

Economists in Cambodia are widely welcoming the move, seeing it as a first step to the de-dollarisation of the country’s economy and the setup of an autonomous monetary policy.

On the other hand, businesses and consumers expressed confusion over whether the central bank’s announcement would lead to an outright ban of small US dollar bills, with some vendors already refusing to accept such notes.

The government and financial institution were then quick to release statements ensuring that small denominated US dollar bills were still legal tender and that people could continue using them and bring them in and out of the country.

“The $1, $2 and $5 notes are still ordinarily used in Cambodia,” Prime Minister Hun Sen said in a post on Facebook, adding that there was “no prohibition like rumor being spread.”

Financial experts say that the effects will only appear over time as the number of small US dollar bills in circulation will shrink and people will use the riel more often instead and small businesses which use small denominations the most will have enough time to adjust.



Support ASEAN news

Investvine has been a consistent voice in ASEAN news for more than a decade. From breaking news to exclusive interviews with key ASEAN leaders, we have brought you factual and engaging reports – the stories that matter, free of charge.

Like many news organisations, we are striving to survive in an age of reduced advertising and biased journalism. Our mission is to rise above today’s challenges and chart tomorrow’s world with clear, dependable reporting.

Support us now with a donation of your choosing. Your contribution will help us shine a light on important ASEAN stories, reach more people and lift the manifold voices of this dynamic, influential region.

$
Personal Info

Donation Total: $10.00

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