KHR - Cambodian Riel

The history of the formation and development of the Cambodian Riel (KHR)

The Cambodian Riel (KHR) has gone through many stages of development along with the economic and political fluctuations of Cambodia.

• Formation stage (1953 - 1975)

The Riel was officially introduced in 1973 to replace the Indochinese Piastre after Cambodia gained independence from France.

The initial denomination of the Riel was pegged to the Piastre. During this period, the KHR was primarily used as paper money issued by the government and foreign currencies.

• The Khmer Rouge period (1975 - 1979)

In 1975, when the Khmer Rouge came to power, the government abolished the monetary system, including the Riel. All cash and the banking system were eliminated, and the economy primarily relied on barter.

• Reconstruction phase (1980 - now)

In 1979, when the Khmer Rouge collapsed, the Cambodian Riel was reintroduced in 1980 under the People's Republic of Kampuchea government.

Initially, many areas still used foreign currency, the US dollar, because the Riel was not widely trusted. But with the economic development of Cambodia, the Riel has gradually gained a position in daily transactions.

Currently, the Cambodian Riel is still used alongside the US Dollar. The Cambodian government has made efforts to promote the use of the Riel, such as paying civil servants' salaries and collecting taxes in Riel.

Cambodian Riel (KHR) Denominations

Currently, the Cambodian Riel is issued in various denominations in the form of banknotes and coins. Among them, paper money is more commonly used in daily transactions.

Cambodian Riel banknotes

• 100៛

• 200៛

• 500៛

• 1,000៛

• 2,000៛

• 5,000៛

• 10,000៛

• 20,000៛

• 50,000៛

Rarely used banknotes

• 50៛ (no longer printed but still legal tender)

• 15,000៛ (commemorative money)

• 30,000៛ (commemorative money)

• 100,000៛

Cambodian Riel coins (rarely used)

• 50៛

• 100៛

• 200៛

• 500៛

Although the denominations of coins and some larger denominations of banknotes are rarely used, the Riel remains the primary medium of exchange in many regions of Cambodia, especially in rural areas.

Cambodian Riel (KHR) exchange rate

The exchange rate of the KHR against strong foreign currencies such as USD, EUR, and GBP is as follows:

• 1 USD ≈ 4,100 - 4,150 KHR

• 1 EUR ≈ 4,500 - 4,700 KHR

• 1 GBP ≈ 5,200 - 5,400 KHR

The KHR has a special relationship with the USD because in Cambodia, the US dollar circulates alongside the Riel in large transactions. 

Based on the exchange rate above, it can be seen that the KHR is worth much less than the US Dollar, Euro, and British Pound. This reflects that Cambodia's economy is small in scale and has a limited level of integration with the global financial market. Therefore, the KHR is not highly regarded in international trade and investment.

Factors affecting the value of Cambodian Riel (KHR)

Below are the main factors affecting the value of the KHR:

The economy is dependent on the US dollar

Cambodia is a country with a highly dollarized economy, as most international transactions and investments are conducted in USD. This not only reduces the role of the Riel but also limits Cambodia's ability to independently adjust its monetary policy.

The domestic inflation rate is high

High inflation causes the prices of goods and services to rise, leading to the depreciation of the local currency. This reduces people's trust in the Riel, and they will switch to using the US dollar or gold. 

The monetary policy of the Central Bank is limited in adjusting monetary policy due to the prevalence of the USD. In addition, the tightening of the money supply helps stabilize the exchange rate of the KHR, but if Cambodia becomes too dependent on foreign reserves, it may face risks if these reserves decrease.

Cambodia's trade balance

Cambodia heavily relies on imported goods, leading to higher demand for foreign currency. The imbalance in the trade balance due to imports exceeding exports increases the depreciation pressure on the Riel.

This country mainly exports textiles and agricultural products, which are affected by fluctuations in the international market, leading to increased demand for foreign currency and causing the value of the Riel to depreciate.

Thus, the value of the Cambodian Riel is primarily affected by dollarization, the trade balance, inflation rate, and so on.These factors reflect the fluctuations in the KHR exchange rate and the difficulties faced by the Cambodian government in adjusting monetary policy.

Future of Cambodian Riel (KHR)

The future of the Cambodian Riel (KHR) hinges on several critical factors, including economic stability, government policy, and regional integration. As Cambodia continues to develop and attract foreign investment, there is potential for the Riel to strengthen in relation to foreign currencies. However, the ongoing reliance on the US dollar for transactions poses challenges to the Riel's broader acceptance and use. Additionally, efforts to enhance the financial infrastructure and promote the Riel in domestic commerce may further support its viability. Ultimately, the trajectory of the Cambodian Riel will depend on a balanced approach to economic growth and national monetary policy.