Hun Sen asked banking institutions to cut loan interest rates, social concerns "release water" or exacerbate inflation

亚洲联合时报 2022-10-11 21:56

Since 2022, affected by global inflation, central banks around the world have raised loan interest rates to curb the impact and pain of rising prices on people's livelihood economy.
In this context, the Cambodian economy has also been affected to a greater extent. On the morning of October 3, Cambodian Prime Minister Hun Sen presided over the graduation ceremony of the "Wanda Academy" at the Shui Jinghua International Convention and Exhibition Center, saying that while some banks in other countries are preparing to increase loan interest rates, the Cambodian government is trying hard to require local commercial banks and Small loan institutions further lowered loan interest rates to ease the financial burden on small businesses.

Hun Sen said that the global economy is entering a new crisis, and the causes of the global economic crisis are partly from the Russian-Ukrainian war, and partly from the mutual sanctions between economic powers.
He believes that the Russian-Ukrainian war that started in February this year has continued until now. Russia's aggressive behavior has caused a series of sanctions from Western countries. Russia has also done its best to oppose the sanctions, which has led to a series of crises on a global scale. These include rising oil prices, inflation, and natural gas shortages.
Hun Sen said the impact had spread to smaller countries, including Cambodia. "We have to be prepared to deal with it."
He recalled the impact of the global economic crisis on Cambodia in 2008, which closed many factories in Cambodia. Hun Sen hoped that all countries in the world could find an optimal solution in this crisis.
Editor’s note: Economic globalization is not entirely a “good thing”. One of the more prominent “problems” of economic globalization is that in the global supply chain structure, a certain industry is excessively concentrated in a certain country, for example, excessive oil reserves The concentration of Saudi Arabia, the excessive concentration of the chip industry in South Korea, Japan, Taiwan and other countries and regions, and the excessive concentration of natural gas in Russia, etc., once uncontrollable social unrest occurs in this country or region, it will have catastrophic consequences for the global supply chain.
For example, through the current Russian-Ukrainian war, we can see that in terms of food, the world's food supply is highly dependent on Ukraine, while in terms of natural gas, European countries are more dependent on Russia.
Affected by the war, these two important sources of supply have been blocked to a certain extent, which has had a profound impact on the world economic structure. global inflation.
In addition, war is a hungry beast. Modern warfare is at the expense of the economy. Western countries’ support to Ukraine is equivalent to emptying their own wallets to fight a war far abroad. The impact of such high consumption will also spread to other countries through economic globalization. In the global trade and economic system, its pressure will objectively be shared with every consumer in the world. This is another aspect of the Russian-Ukrainian war. invisible impact.
Even worse, since the outbreak of the Russian-Ukrainian war, the financial market has been pessimistic and sluggish, and currency circulation has tightened, thereby increasing global inflation, and Putin recently hinted that the use of nuclear weapons in this war will not be ruled out, which has brought mankind closer to a nuclear crisis than ever before. The impact of pessimism on the economy will be further highlighted.

In September, the World Bank released its latest economic outlook report on East Asia and the Pacific, pointing out that Cambodia's economy, which is highly dependent on commodity imports and exports, will be more vulnerable to the economic crisis than other countries.
The report also said that the current US Federal Reserve and central banks have raised lending rates, which has led to a tightening of global financial markets, which is objectively unfavorable for Cambodia, which relies on short-term financing from external sources.
Recently, the National Bank of Cambodia released a semi-annual report showing that since the beginning of this year, many local commercial banks and small loan institutions have raised deposit interest rates. Among them, the US dollar deposit interest rate of commercial banks has risen by at least 0.3% within six months, while the Cambodian currency deposit interest rate. remain basically unchanged.
According to the report, in the first half of the year, the average interest rate of U.S. dollar deposits of local commercial banks in Cambodia was 4.93%, which was nearly 0.4% higher than the average interest rate of 4.6% in the second half of last year. The average interest rate of U.S. dollar deposits of small loan institutions also rose to 7.16%. It is 6.90%.

This means that, in response to a possible severe economic crisis, the Cambodian financial system is being prepared and targeted to tighten the circulation of US dollars in the market.
This time, Hun Sen asked local commercial banks and microfinance institutions to further reduce loan interest rates, with the intention of releasing more US dollars in the circulation field to ease the survival pressure of small and medium-sized business owners and small traders. Although "water release" can alleviate the urgent needs of small and medium-sized business owners and small traders, based on long-term considerations, such a measure will also further exacerbate domestic inflation and further push up domestic prices.