This post will review a notice from the National Bank of Cambodia [13-020-004] “The US Dollar Circulation in Cambodia”- This notice is important if you are a business entity conducting business using small U.S. dollar notes, or an individual that makes transactions in small U.S. notes.
The Director-General of the National Bank of Cambodia led a meeting with representatives of leading banking and financial institutions on the challenges of U.S. $1, $2, and $5 dollar notes, and the consequences to banks and financial institutions, and how the National Bank of Cambodia intends to manage these types of bills.
In a situation where the world is facing a global health crisis and is entering a recession, strengthening the independence of monetary policy will contribute to more efficient economic growth. In this direction, Cambodia needs to promote wider use of the Khmer Riel. Therefore, keeping the circulation of small U.S. dollar notes is a barrier to promoting the use of the Riel.
In the last six months, the Riel, as well as regional currency has depreciated significantly against the U.S. dollar. For countries in the region, their depreciation is mainly due to a decline in exports and capital outflows. As for Cambodia, the depreciation of the Riel is mainly due to the decline in domestic economic activity and the depreciation of the Riel for tax purposes.
The depreciation of the Riel against the U.S. dollar has a negative impact. Therefore, in order to stimulate the demand for the use of the Riel in the economy, especially for smaller transactions, the use of small U.S. dollar notes should be replaced by the Riel.
The National Bank of Cambodia [NBC] is the only institution that has the authority to ship foreign currency into Cambodia. Despite its role, the NBC has streamlined the transfer of U.S. banknotes to Cambodia, particularly for the small and old US dollar bills.
The National Bank of Cambodia has a hard time controlling the quality, as the export of these notes costs more in labor and money. On the other hand, the foreign partner banks that facilitate the acceptability of small U.S. dollars are smaller, and they are also restricting the receipt of small U.S. dollars denominations, despite high fees. This becomes even more difficult in the face of the global epidemic of COVID-19, which has resulted in fewer flights to and from Cambodia.
What’s happening next
The National Bank of Cambodia will provide 3 months from 1 June 2020 to 31 August 2020 to the banks and financial institutions to bring U.S. $1, $2, and $5 dollar notes to the National Bank of Cambodia for free shipping overseas.
After August 31, 2020, the National Bank of Cambodia will transfer the cost of shipping U.S. $1, $2, and $5 dollar notes to the banking and financial institutions.
There is no fee for receiving U.S. $10 dollar notes and higher. The National Bank of Cambodia also notes that the implementation of the above measures does not mean the ban on the circulation of these small U.S. dollar notes.
What this means for you
Well, that depends, do you have a reliance on small U.S. dollar notes for personal or business use? If you are a business, you may need to figure in the costs of processing small U.S. dollar notes when doing business with your bank.
How ASEANTAX can help you
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View the official NBC document with English translation (MEMBERS ONLY)
Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice.