A Currency Nobody Wants...Except One Lonely Believerby
At the end of every workday in Cambodia, a motorbike-taxi driver called Pak takes his earnings to a money changer. He pulls wads of 200- and 500-riel notes from his pockets and spreads them in front of an old woman who sells the two most precious items on sale in Cambodia: U.S. dollars and gold. On a Wednesday in late June, Pak was able to buy $7 and have a few riel notes left over for dinner. He hopes to save $80 in the next few weeks. Then he'll buy a thick gold ring so he can keep his savings in the safest place he knows--on his finger.
Like most Cambodians, Pak wouldn't dream of keeping his money in a bank. And he has history on his side by not wanting to keep his savings in Cambodian riel, either. That's because Cambodia has the unique distinction of being the only country in the world ever to have abolished money.
When the Khmer Rouge took power in 1975 in a revolution that claimed more than 1 million lives, they marched into Phnom Penh, dynamited the central bank and left worthless banknotes blowing in the streets. People with bank accounts were immediately impoverished. For four years, money was completely banned. Personal property, except for a change of clothing and a spoon, was forbidden. Everything else belonged to the state.
Cambodia's economy today is a legacy of that upheaval. Although Cambodia has a currency again, virtually all buying and selling is with U.S. dollars. The Cambodian riel is used like cents--for things that cost less than $1, such as fruit in the market or a taxi ride. "We cannot trust Cambodian money because of what happened during the Khmer Rouge time," says Dany, a jeweler near the central market. "We keep our dollars hidden under the floor."
Cambodians' fears were borne out by heavy fighting in the capital on July 5-6 in which one prime minister overthrew the other. The riel fell from 2,730 to the dollar to 3,020 before settling near 2,900--a 6% depreciation.
Because of this lack of confidence in the currency, riel accounts for only 5% of total deposits in Cambodian banks. Somsak Lertthaiwithit, a Thai national who has been deputy manager of the Cambodian Commercial Bank since it opened in 1991, has never once had a Cambodian come in to make a deposit in riel, even though riel accounts bear 10% interest--higher than the annual 7% inflation rate and far above the 2% that U.S. dollar accounts earn. The bank's few riel accounts are mainly from companies who need to pay their employees and their taxes in riel--a government requirement. "People are afraid," he says. "They think if they have U.S. dollars in their pocket, they can leave and go abroad if problems happen."
Of course, part of the problem is that using riel is inconvenient. It takes a brick of bills rubber-banded together to buy anything over $10. "Before, if you went to a restaurant, you couldn't put enough riel in your pocket. You had to carry a packet like this," says Chea Sok, general director of the reconstructed central bank, the National Bank of Cambodia.
So the government is trying to encourage Cambodians to use riel in two ways: by decree and by issuing larger denominations up to 100,000 ($34.50). So far, the decrees have been largely ignored. And so have the larger notes. Says Chea Sok: "People don't yet believe."
But the riel has at least one believer, a self-proclaimed nationalist called Sam Naly. Naly, 53, is an elegant, French-speaking former Khmer literature teacher who lost her father and four siblings to the Khmer Rouge. Nonetheless, she is proud of Cambodia's rich architectural heritage, Angkor Wat, which appears on riel notes.
About 18 months ago, she opened Cafe Le Riel, a shaded outdoor terrace serving morning breakfast and all-day coffee off a tucked-away dusty street of Phnom Penh. She asked that her customers--mostly foreign-aid workers--use riel only. That lasted only a few months. "When I asked that people use riel, there weren't a lot of customers," she sighs. "So now people can pay in dollars. But I prefer if they pay in riel."
Naly thinks people should use the riel despite Cambodia's unstable politics. Then they perhaps will begin to take more pride in their country. "It is our Cambodian money," she says. "If we use it, little by little, it will go up in value."