Cambodia has been a heavily dollarized country since it returned to civilian rule in the early nineties. Roughly 80% of transactions are in US dollars. Prior to becoming the Governor of the National Bank of Cambodia, Chea Serey spearheaded the launch of the Bakong digital currency payment system in 2020. A key aim was to encourage a higher proportion of transactions in the local riel rather than dollars. Based on figures for the first half of 2024, that strategy looks like it’s working.
Bakong has been a huge success. By the end of last year, the central bank said there were ten million wallets out of a 17 million population. While often described as a central bank digital currency (CBDC), Bakong is closer to a tokenized deposit initiative with the Bakong currency backed by balances at commercial banks.
More Bakong transactions use riel
Recent statistics for the first half of 2024 indicate continuing growth and an increasing proportion of transactions in the riel. During 2023, the riel was used in 34.2% of Bakong transactions versus 43% for the first half of this year.
Unsurprisingly given the number of wallets, the rate of growth has slowed. In 2023 the number of riel transactions was almost eight times the 2022 figure. In contrast, the 2024 figures for the first six months are 1.8 times the equivalent 2023 period. Currency wise, riel transactions are up 1.4 times at 64.9 trillion riel and dollar transactions were $38.8 billion, or 1.3 times 2023 H1 figures.
One of the key tactics to encourage use of the local currency is to only support cross border payments using riel. Bakong has existing cross border payment arrangements for Bakong with Thailand, Laos and Vietnam and is expanding its collaborations with China, Japan, India, Korea, Singapore and Malaysia. Late last year it partnered with Alipay+, the international arm of the dominant Chinese wallet. Additionally, it’s encouraging local retailers to quote prices in riel.
There’s another reason the strategy is working. With a prudently managed economy, the riel can hold its own in the foreign exchange markets. It has an unofficial peg of 4000 riel to the dollar, which it has managed to more or less hold for the past 20 years. During the past ten years it has varied by less than 5%. Given the decline in the US dollar in the last few days, the riel has now slightly appreciated against the dollar over the past year. Other currencies in the region such as the Thai Baht, have depreciated a little.
