## Dollarization in Cambodia: Causes and Policy Implications

_IMF Working Papers, March 1, 2011_

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**Canonical URL:** [Dollarization in Cambodia: Causes and Policy Implications](https://www.imf.org/en/publications/wp/issues/2016/12/31/dollarization-in-cambodia-causes-and-policy-implications-24690)

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## Bibliographic details
- Authors: Nombulelo Braiton
- Published: March 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455218936.001

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### Executive summary and key findings
- Over the past decade, Cambodia has become Asia’s most dollarized economy.
- In contrast, dollarization in neighboring Lao P.D.R., Mongolia, and Vietnam has been either declining or broadly stable.
- Growing dollarization in Cambodia has occurred against the backdrop of greater macroeconomic and political stability.
- The usual motive, currency substitution, does not appear to have been a factor.
- As the volume of dollars increased over the years, so has the volume of riel.
- A strong inward flow of dollars related to garments sector exports, tourism receipts, foreign direct investment, and aid has benefitted the dollar based urban economy.
- The riel based rural economy has lagged behind.

### Analysis of causes
- External and sectoral dollar inflows:
  - Garments sector exports.
  - Tourism receipts.
  - Foreign direct investment.
  - Aid.
- Limited role for traditional currency substitution motives.
- Dual expansion:
  - Both dollar supply and riel supply increased over the period, indicating parallel currency growth rather than substitution.

### Policy implications and recommendations
- De-dollarization should follow international experience emphasizing:
  - A carefully managed market based strategy.
  - Continued stable macroeconomic environment to support such a strategy.
- Policy focus needed on:
  - Strengthening riel use in the rural economy to address the urban–rural divide in currency usage.
  - Market-based measures rather than heavy-handed administrative controls.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/dollarization-in-cambodia-causes-and-policy-implications-24690_