[PHNOM PENH POST]
A proposed increase in the reserve requirement would decrease lending
and slow Cambodia’s economic growth, according to some bankers and
experts.
The National Bank of Cambodia is set to hold a meeting
later this month discussing a possible raise of the reserve requirement
from 12 percent at present to 16 percent, seeking to rein in inflation
which NBC officials have said could hit 9 percent this year.
The
reserve requirement sets the amount of capital commercial banks must
hold rather than lend out, and raising the rate would lower the amount
banks are able to lend to customers.
HwangDBS Commercial Bank Plc
General Manager Han Peng Kwang said an increase to the reserve
requirement could make it more difficult to obtain a loan in Cambodia.
“If
NBC decides to increase the reserve requirement rate, then the bank
will have less funds for lending and thus will reduce the amount of
borrowing in the banking industry,” he said.
Economist Kang
Chandararot at the Cambodia Institute for Development Study said the NBC
should find another solution to curb rising prices, rather than using
the reserve requirement rate.
Rising inflation particularly in food prices was not coming from the internal economy, he said.
“The
inflation we have here is not derived from the increase in purchasing
power as in China. It is imported inflation,” he said. “If the NBC uses
this policy, it will just place a larger burden on us.”
He
advocated increased development of the agro-industry as a means to
combat increases in food prices. The policy change could also hamper
loan growth and cause an increase in interest rates at Microfinance
Institutions, said Cambodia Microfinance Association President Chea
Phalarin. However, the decision could help in protecting the industry
and stabilising the economy, he said.
Larger banks say the impact of a raised reserve requirement would mostly impact Cambodia’s smaller banks.
Cambodia’s
largest banks are sitting on an ample liquidity cushion and would not
be too affected, but some smaller banks may have to tighten their
“loan-belt”, wrote Canadia Bank Vice President Dieter Billmeier.
“[An
increase] could slow down the flow of new loans into the Cambodian
economy, because there will be less funds available for fresh loans,” he
said.
“However I believe that the market will understand and
accept the need of the NBC to have tools in place to deal with inflation
threats.”
Some experts defended a possible raise to the reserve requirement, saying it was important to rein in inflation.
Given
the highly dollarised domestic economy, the NBC has constrained options
available to deal with inflation, as it cannot set interest rates,
wrote Kookmin Bank Cambodia President Jang Ki-Sung. “I think the only
effective way is to control banking reserve requirements and it is
inevitable to fight inflation,” he said.
“Kookmin Bank Cambodia
will be very cooperative with NBC to control inflation and ready to
follow its monetary tightening policy.”
On Monday, Nguon Sokha
said the National Bank of Cambodia was to hold a meeting on the issue,
adding nothing had yet been decided.
No comments:
Post a Comment