Cambodia cuts bank rate

PHNOM PENH - CAMBODIA cut its bank reserve requirement by four percentage points and ended a restriction on real estate lending on Monday to boost growth in the cooling economy, a national bank official said.

Mr Tal Nay Im, director general of the National Bank of Cambodia, said it had cut the reserve requirement to 12 per cent and eliminated a cap whereby only 15 per cent of a bank's total loans could be for real estate deals.

The moves aim to stimulate lending, which it hopes will lift the country's sagging property market, she added.

'We decreased the reserve requirement from 16 percent to 12 percent so that the banking system has more liquidity to provide credit to the economy,' Mr Tal Nay Im said, adding that the regulation was effective from Monday.

Cambodia's national bank increased the reserve requirement last April amid worries that its economy would overheat as inflation reached more than 25 perc ent due to soaring crude oil and food prices at the start of the year.

But now analysts say there is little risk of inflation as commodity prices have been battered by the global financial crisis.

International financial organisations expect Cambodia's economy to grow by less than five per cent this year.

Cambodia averaged double-digit economic growth each year from 2004 to 2007, but due to lower demand from other countries for its main industries - garments, construction and tourism - it slowed to less than seven percent in 2008.

Despite the excellent growth over the past several years, underemployment - in which work earns only a meagre return - remains high in Cambodia, one of the world's poorest countries.

Some 35 per cent of the country's 14 million people live on less than 50 cents a day. -- AFP