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Thursday, January 22, 2009

Expert calls for Cambodian gov't to lower bank reserve rate

PHNOM PENH, The government must lower the reserve rate of banks so that financial institutions can loan more money and fuel the economy in the grips of a financial slowdown, national media reported on Thursday.

The National Bank of Cambodia, in an attempt to lower inflation and cool the lending market, began requiring in May 2008 that banks double their reserves from 8 to 16 percent of all their foreign currency.

"Inflation is coming down particularly in food and energy costs(since December 2008) and now the danger is the economy slowing down, so at some stage (the government) might relax some of its policies on credit squeezing," English-Khmer language newspaper the Cambodia Daily quoted John Brinsden, vice president of the Acleda Bank, as saying.

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The reserve rate has significantly cut Acleda's ability to issue loans, he said, adding that outstanding loans at Acleda grew just 5 percent in the last six months of 2008 after the central bank doubled the reserve rate.

Prior to that, in the first six months of 2008, outstanding loans at Acleda grew 50 percent to more than 450 million U.S. dollars, he said.

"We just do not have the funds we would like (available)," he added.

The Cambodian economy enjoyed double-digit increase during the 2005-2007 period, but down to below 10 percent in 2008 and will further slide to around 5 percent in 2009, according to the forecasts by experts and international financial institutions.

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