One of the leading global organisations committed to contributing to the macroeconomic and financial resilience along with economic stability in the Asean+3 region, has urged the National Bank of Cambodia (NBC) to establish deposit-protection schemes to further boost the stability of the banking framework in the country. In its list of annual recommendations, ASEAN+3 Macroeconomic Research Office (AMRO) says that introducing a well-defined deposit protection scheme for both local and foreign currencies would help to mitigate the risk of a bank run. “The NBC should intervene in the market judiciously to minimise excessive volatility while striking a balance between exchange rate stability and foreign reserve adequacy. The financial supervisory framework and domestic financial safety net could be further strengthened. “The NBC’s gradual normalisation of its monetary and macro-prudential policy measures, including restoring the reserves requirement ratios for foreign currency deposits and the build-up of the capital conservation buffer is appropriate. The pace of adjustments should consider the tight global financial conditions,” AMRO said, as it listed measures to avoid uncertainties in the banking and financial sectors. It said tightening the regulatory oversight and supervision of unregulated shadow banking activities is critical to mitigate risks stemming from a prolonged real estate downturn. “Regulators should maintain a comprehensive and consistent approach when it comes to evaluating, granting, and managing licenses to real estate developers. “Stringent regulations and vigilant monitoring, supported by a centralised and standardised data management system, are imperative to rein in lax lending practices between home buyers and developers.” According to AMRO, under the new government, a steadfast commitment to structural reforms remains crucial to sustain rapid economic growth. “Cambodia’s firm commitment to implementing comprehensive climate change measures and embracing new technologies will help advance the transition to a green and digital economy. “Diversifying the economic structure can help enhance Cambodia’s resilience against external shocks and boost its global value chain participation. The tourism sector should be further strengthened with various support measures to improve its attraction to foreign tourists.” The organisation pointed out that restoring fiscal space should remain a policy priority, involving a complete phasing out of pandemic-related stimulus as well as the recent counter-inflationary measures. “With the expected removal of short-term stimulus measures by the end of 2023, the focus in 2024 should be on fiscal consolidation and improving the long-term growth prospects of the economy by accelerating economic diversification and competitiveness, improving social protection, and enhancing infrastructure. “Boosting revenue and augmenting spending effectiveness is vital to enhance fiscal space and medium-term fiscal sustainability. The newly adopted medium-term policy framework for implementing a personal income tax system is commendable, given the country’s relatively low collection of personal income tax.” Speaking to Khmer Times, a senior executive of one of the leading banks in the country said deposit-protection schemes will definitely contribute towards further stability in the banking sector. “Cambodia is an emerging economy and there is a high requirement to boost the savings rate of its citizens until it becomes a high-income country. “Deposit-protection schemes will definitely motivate citizens to save more and more, in turn increasing the financial stability while thwarting risks associated with the banking industry.” He said, “The deposit-protection schemes have been implemented in many countries including those in the Asean region and the initiative has tremendously contributed towards raising the savings rate and bringing positive impacts on the economies of these countries.”

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