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Cambodia’s Economy: A Stability Report

Overview of Cambodia’s Financial Stability

Cambodia’s economy has been exhibiting a strong performance, with adequate international reserves and a stable exchange rate. However, there are still some risks associated with high dollarization, which could affect the country’s monetary policy and financial system.

Composition of Gross External Debt

The composition of gross external debt in Cambodia is shown in Figure 7, with the majority being bilateral (34.6%) and multilateral (24.8%) debts.

Government’s External Debt

Figure 8 shows that the government’s external debt accounts for a significant portion of total external debt.

Exchange Market Pressure

Figure 9 indicates that exchange market pressure has been relatively stable, with some fluctuations over the past few years.

Bilateral and Effective Exchange Rates

Figure 10 shows bilateral and effective exchange rates, which are used to analyze exchange rate pressures.

International Reserves

Cambodia’s international reserves have increased significantly in recent years, reaching USD 10.1 billion in 2018, equivalent to around 5 months of prospective imports.

Dollarization

The economy remains highly dollarized, with foreign currency deposits accounting for a large share of the total money supply.

Risks and Challenges

While Cambodia’s financial stability is generally strong, there are still some risks associated with high dollarization. This could affect the country’s monetary policy and financial system.

Questions for Further Analysis

  1. What are the main drivers of Cambodia’s current account deficit?
  2. How has the government been managing its external debt?
  3. Are there any potential risks or challenges associated with Cambodia’s high level of international reserves?
  4. How does the country’s monetary policy framework take into account the high dollarization of its economy?

Recommendations for Further Research

  1. Conduct a detailed analysis of Cambodia’s current account deficit and identify the main drivers.
  2. Examine the government’s debt management strategy and assess its effectiveness in managing external debt.
  3. Investigate the potential risks associated with high international reserves and explore ways to mitigate these risks.
  4. Analyze the monetary policy framework in place and assess its ability to address the challenges posed by high dollarization.