History of the Khmer Riel: From Independence to the Present
Introduction
The Khmer riel (៛, KHR) is Cambodia’s national currency, which has undergone two distinct incarnations. The first riel circulated from 1953 (after independence) until 1975, when it was abruptly abolished under the Khmer Rouge regime. The country then had no monetary system from 1975 to 1980. The second riel was reintroduced in March 1980 and remains in use today . Over these periods, the riel’s history has been shaped by Cambodia’s turbulent political shifts – from colonial rule and monarchy, to war and communist revolution, to post-war recovery. Key milestones include its initial issuance following independence, the abolition of money during 1975–1980, and its reintroduction in 1980. This report chronicles the riel’s journey, highlighting the political/economic context of each era, inflation trends, exchange rate regimes, and the profound impact of dollarization on Cambodia’s economy.
First Issue of the Khmer Riel (1953–1975)
Introduction of the Riel After Independence (1953–1955)
Cambodia gained independence from France in 1953, ending the use of the French Indochinese piastre. In the mid-1950s the young nation established the National Bank of Cambodia and introduced the Khmer riel as its sovereign currency . Initially, the riel was equivalent in value to the outgoing piastre (at par) and both currencies co-circulated for a brief transitional period until about 1955 . Early riel banknotes were even dual-denominated in piastre and riel, underscoring continuity with the former colonial currency . The riel was subdivided into 100 sen (cents); coins of 10, 20, and 50 centimes were issued in 1953 (aluminum pieces matching the size of Lao and Vietnamese coins) . By the late 1950s, Cambodia had fully phased out the piastre in favor of its own riel. This period, under King Norodom Sihanouk’s Sangkum Reastr Niyum regime, saw relative monetary stability and economic growth, with the riel providing a symbol of nascent national sovereignty .
Sihanouk Era Stability and the 1960s
Throughout the 1950s and most of the 1960s, Cambodia’s economy and currency were fairly stable. The government maintained prudent finances early on, and the riel held its value under a fixed exchange posture. During the Bretton Woods era, many currencies were pegged to the US dollar or gold, and Cambodia likely managed its exchange rates within this system (for example, the riel was roughly 3.5 riels per French franc and indirectly tied to the dollar via the franc’s peg) . The exact peg of the riel in the 1960s is not well documented in public sources, but inflation remained low and the currency was generally trusted. Sihanouk’s neutral foreign policy in the 1960s kept Cambodia out of direct conflict for a time, enabling steady economic growth. As a result, the riel’s first decade was marked by growth and monetary confidence . Prices were stable enough that small-denomination coins (such as 5 sen coins) were practical, and larger banknotes were modest (e.g. 100 riel notes had significant value at the time).
The Khmer Republic and War-Time Inflation (1970–1975)
Cambodia’s stability unraveled in the late 1960s and early 1970s amid regional upheavals. In 1970, Prime Minister Lon Nol led a coup that ousted Sihanouk, establishing the U.S.-backed Khmer Republic. The ensuing civil war against the communist Khmer Rouge, coupled with spillover from the Vietnam War, put extreme strain on the economy. Government finances deteriorated rapidly: military expenditures soared while tax revenues collapsed. The Lon Nol regime resorted to printing money to finance large budget deficits, undermining the riel’s value . By the early 1970s, inflation was accelerating and confidence in the currency began to erode.
A currency crisis erupted in 1974, as the war intensified and the economy crumbled. The riel’s purchasing power plummeted – in effect, a currency collapse in 1974 – largely because the government flooded the economy with paper money to cover war costs . An astonishing statistic underscores this collapse: by 1974, foreign aid (mostly from the United States) made up over 90% of the government’s budget, while domestic taxes accounted for only 2% . This unsustainable situation led to skyrocketing prices and a near worthless riel by 1975. (One CIA report from 1974 noted rampant inflation and food shortages as currency values fell .) Despite these challenges, the Khmer Republic continued using the riel – even issuing new banknotes based on earlier designs. For instance, Lon Nol’s government in the 1970–75 period reused banknote templates from Sihanouk’s era (the Sangkum), adding a few new cultural motifs like the image of poet Kram Ngoy on some notes . These efforts did little to restore trust, and by 1975 the riel was severely devalued.
Abolition of Money under the Khmer Rouge (1975–1980)
In April 1975, Phnom Penh fell to the Khmer Rouge, and Cambodia (renamed Democratic Kampuchea) underwent one of history’s most radical social upheavals. The Khmer Rouge immediately abolished currency and banking altogether – an unprecedented step aimed at creating a pure agrarian socialist society. Markets, private property, and money were outlawed overnight. In a chilling symbol of this policy, the Khmer Rouge blew up the Central Bank building in Phnom Penh in 1975 . People were forced to survive through barter or state rationing; rice, gold, and other goods became the mediums of exchange in the absence of money. Notably, the Khmer Rouge had printed a new series of banknotes in 1975 (reportedly produced in China) in preparation for a currency, but at the last moment the regime decided not to put them into circulation . These unissued 1975 banknotes (in denominations such as 0.1, 1, 5, 10, 50, 100 riels) are now merely collectors’ items – a phantom currency for a state with no money. For nearly five years (1975–1979), Cambodia had no official currency – a truly unique situation in modern history . This period, often called “Year Zero,” devastated the economy and society; the lack of a monetary system exemplified the extremity of Khmer Rouge policies.
Second Issue of the Khmer Riel (1980–Present)
Reintroduction of the Riel in 1980: Starting Over
The Khmer Rouge regime was overthrown in January 1979 by invading Vietnamese forces, leading to the establishment of the People’s Republic of Kampuchea (PRK). One of the new government’s urgent tasks was to rebuild a functioning economy – which required a currency. In March 1980, the Khmer riel was reintroduced as Cambodia’s official currency, marking the second life of the riel . The initial rollout of the new money took place on 20 March 1980, and the riel’s value was initially fixed at 4 riels = 1 US dollar . (In other words, 1 riel was pegged at USD $0.25 at inception.) This exchange rate was largely symbolic to instill public confidence, since virtually all currency in circulation had to be created from scratch – people had been living by barter and had no money at all. The public generally welcomed the return of cash for daily transactions , but establishing trust in the new riel was challenging.
The early 1980s riel banknotes featured themes of rebuilding: images of rural work, irrigation, factories, and the Independence Monument in Phnom Penh were common, reflecting efforts to modernize the war-torn country . In a nod to the revolutionary leadership, some notes even bore the portrait of Son Ngoc Minh, a veteran Cambodian communist figure, marking the only time a political leader (aside from royalty) has appeared on Cambodian currency . During this PRK era, Cambodia’s economy was centrally planned and isolated. Inflationary pressures quickly emerged – the government had limited financial resources and often resorted to the printing press to cover expenses, much as the previous regime had. Public confidence in the riel remained fragile due to the ongoing civil conflict (Khmer Rouge guerrillas continued to wage an insurgency) and the general impoverishment of the 1980s Cambodian economy .
Exchange Rate and Inflation in the 1980s: The official 4:1 peg to the US dollar did not hold for long. The riel effectively began to float and depreciate as more currency entered circulation without corresponding economic growth. Over the 1980s, the riel’s value fell dramatically. By the end of the decade, $1 USD was worth about 218 riels on the market – a striking depreciation from the initial 4 riels per dollar. This implied a severe inflation internally: the increase in money supply outpaced output, causing prices to rise and the exchange rate to weaken year after year. Indeed, Cambodia experienced bouts of high inflation in the late 1980s, reflecting monetization of fiscal deficits and war-related disruptions . The protracted civil war and lingering unrest eroded public trust in the riel during this time . Many Cambodians in border areas or those engaged in international aid work began to use foreign currencies (especially gold, Thai baht, or U.S. dollars) as a store of value, foreshadowing the dollarization to come . Still, throughout the 1980s the riel was essentially the only legal tender for internal commerce, and the National Bank (re-established in 1979) struggled to stabilize the young currency.
The 1990s: Hyperinflation and the Rise of Dollarization
Cambodia’s fortunes – and its currency’s fate – took a sharp turn in the early 1990s. In 1991, a peace agreement was signed to end the civil war, and the United Nations Transitional Authority in Cambodia (UNTAC) arrived in 1992 to facilitate elections. However, the late 1980s and early 1990s saw severe economic instability. The government, still facing large budget deficits, resorted to heavy money printing around 1990–1992 . The result was a burst of hyperinflation: the money supply tripled in 1992, and annual inflation peaked at 177% that year . By the end of 1992, the riel’s value had collapsed to around 2,020 KHR per 1 USD – a tenfold depreciation from just a few years earlier. This three-digit inflation severely undermined the riel’s credibility. Many Cambodians, remembering the total loss of money in 1975 and now witnessing another wipeout of value in their cash holdings, turned increasingly to the U.S. dollar (and gold) for stability .
Concurrently, the UNTAC mission (1992–93) brought an enormous influx of foreign currency into Cambodia. International donors and the UN poured in around $3 billion USD over a two-year span to support peace and reconstruction . This wave of dollars – termed a “dollar tsunami” by observers – quickly permeated the local economy . With tens of thousands of UN personnel, NGOs, and contractors spending money, the US dollar became a de facto second currency for many transactions . Cambodians eagerly accepted dollars (and Thai baht in border regions) for payments, as these held their value better than the riel amid ongoing inflation . By 1993, Cambodia had effectively become a dual-currency economy, and the trend toward dollarization was firmly entrenched .
Despite the turmoil of the early ’90s, there were positive developments. The United Nations-supervised elections in 1993 restored the Kingdom of Cambodia under a constitutional monarchy. The new coalition government (led by Prince Norodom Ranariddh and Hun Sen) moved to liberalize the economy and institute more disciplined fiscal and monetary policies. As stability returned in the mid-1990s, inflation subsided dramatically. From an average inflation rate of over 50% in 1990–1993, Cambodia achieved relative price stability by the late 1990s, with inflation in the single digits . The National Bank of Cambodia, gaining more experience, refrained from monetizing deficits to the same extent, and donor funds helped cover budget needs.
Exchange Rate Regime in the 1990s: After the hyperinflation peak of 1992, the riel’s exchange rate stabilized to a degree. By the mid-to-late 1990s, the riel was trading around 2,500–3,000 per USD, and it gradually settled around 4,000 KHR/USD by the end of the 1990s . Since then, the rate has remained surprisingly stable (an unofficial peg around 4,000–4,100 KHR to $1). This stability is partly organic – the flood of U.S. currency and the public’s preference for dollars effectively anchor the riel’s value in a narrow band. It is also managed by the central bank through interventions; the National Bank accumulates reserves and can supply or absorb riel liquidity to prevent excessive volatility. By 1998–1999, many observers noted that Cambodia’s riel seemed “fixed” at roughly 4,000 KHR per USD despite no formal peg, due to the high degree of dollar usage and prudent monetary policy .
Another notable change in the 1990s was in the currency’s design and denominations. During the socialist 1980s, riel banknotes featured anonymous workers and monuments. After 1993, with the monarchy reinstated, banknotes began to include royal portraits and traditional symbols again. For example, new high-denomination notes introduced in 1994–95 (such as the 5,000 and 10,000 riel notes) depicted King Norodom Sihanouk and Angkor Wat. Royal imagery had been absent from currency since the 1970 coup; its return on the riel underscored a link to Cambodia’s heritage and improved public perception of the currency . Additionally, larger denominations were necessary because inflation had made pre-1990s notes (which maxed out at 1,000 riels) insufficient for an economy where many prices were in the thousands of riels. By the end of the 1990s, the largest note was 50,000 riels, equivalent to roughly $12 at the time.
2000s–Present: Dollarization, Stability, and Recent Developments
Over the past two decades, Cambodia’s macroeconomic situation has been markedly stable, and the riel has maintained a steady exchange rate. Since the early 2000s, the riel has traded in a tight band around 4,000–4,100 KHR per US$1 . Inflation has generally been low (averaging only a few percent annually in the 2000s, aside from occasional spikes due to global fuel or food prices) . The National Bank of Cambodia uses a managed float regime – intervening to smooth out exchange fluctuations – effectively resulting in a quasi-peg to the dollar in practice. This stability has been a boon to commerce and planning. However, it is important to note that this monetary stability has occurred in the context of extensive dollarization of the economy.
Extent of Dollarization: Cambodia today is one of the most highly dollarized countries in the world outside the United States. Estimates suggest that roughly 80–90% of currency in circulation is actually U.S. dollars, not riel . Dollars serve as the preferred store of value and medium of exchange for most large or urban transactions, whereas the riel is mainly used for small purchases, street markets, and in rural areas . For example, in Phnom Penh it is common to see prices quoted in USD (for hotels, restaurants, electronics, etc.), with riel used only for making change or buying groceries. Even the Cambodian government often collects fees in dollars (notably, visas for tourists must be paid in USD) . Cambodian banks and businesses likewise keep the bulk of their deposits in foreign currency – by the mid-2000s, about 97% of all bank deposits were in US dollars rather than riel . In essence, the riel circulates alongside the dollar, but the dollar has dominated in value and trust for many years.
Fig. 1: Fan of Cambodian riel banknotes (mostly 5000៛ and 10,000៛ notes). Despite the riel’s widespread use for small transactions, around 90% of the currency in circulation by value is the U.S. dollar . The riel notes often feature images of Angkor Wat, the Royal Palace, and portraits of Kings, reflecting national culture.
Impact of Dollarization: The heavy dollarization has had mixed effects on Cambodia’s economy and the role of the riel. On one hand, using a stable foreign currency (USD) helped restore confidence and check inflation in the fragile post-war environment . It protected the public from exchange rate volatility and allowed Cambodia to integrate into a globalizing economy with minimal currency risk – effectively importing monetary stability from the US. This is reflected in the low inflation rates since the late 1990s and the riel’s stable exchange value. On the other hand, dollarization comes at the cost of monetary sovereignty. The National Bank of Cambodia cannot fully control its money supply or set independent monetary policy, since changes in U.S. monetary policy and capital inflows/outflows largely determine liquidity. The country also forgoes seigniorage revenue (the profit from issuing currency) because most of the circulating currency is issued by the U.S. Federal Reserve, not by Cambodia . Additionally, a heavily dollarized system can make the economy vulnerable to swings in the value of the dollar and complicates the effectiveness of lender-of-last-resort actions by the central bank.
The Cambodian authorities have long been aware of these trade-offs. There have been periodic calls and efforts to promote the riel and reduce reliance on the dollar. For instance, the central bank sponsors an annual “Riel Day” (March 20, commemorating the 1980 reintroduction) to educate the public on the importance of using the national currency . Regulations have been introduced requiring businesses to quote prices in riel and banks to hold a portion of their assets in riel. In the late 2010s, the National Bank launched a blockchain-based payment system (Bakong) to encourage riel-denominated digital transactions . Despite these steps, de-dollarization has been very gradual. The ingrained public preference for dollars, after decades of instability, has been hard to reverse. As of the mid-2020s, the share of dollars in circulation remains around 80–90%, barely lower than a decade ago . High dollarization is “a persistent legacy of past instability”, and authorities recognize that restoring trust fully in the riel will take continued stability and growth . Some officials have framed de-dollarization as a matter of national pride and economic security – for example, Cambodia’s Finance Minister in 2006 argued that reducing dollar dependence was important for sovereignty . However, the government has refrained from any drastic measures (like legally banning USD), opting instead for a market-driven approach to gradually increase riel usage .
Recent Developments: The riel has slowly gained more footing in daily life as the economy expands. The government now pays civil servant salaries in riel, and riel-denominated loans and deposits in banks have grown in absolute terms (though still a small fraction of total deposits) . The National Bank’s foreign exchange reserves have grown large enough to back the monetary base and maintain confidence. Notably, the central bank has continued to issue new higher-denomination riel notes to facilitate larger transactions in local currency. A 100,000 riel note (approximately $25) was first introduced in 1995 and re-issued in commemorative forms (e.g. for the King’s 60th birthday in 2012) . In 2024, the National Bank even issued a 200,000 riel banknote to mark a special occasion, the highest denomination to date . These high-value notes signal confidence that the riel will remain relevant. Meanwhile, Cambodia’s economy has grown robustly (averaging ~7% GDP growth for much of 2000–2019), and poverty has fallen – achievements made under a dollarized yet stable monetary environment . The COVID-19 pandemic in 2020 caused a minor economic contraction and tested the financial system, but the National Bank, under its highly dollarized constraints, managed to support the economy through liquidity measures and maintained currency stability .
As of 2025, the Khmer riel continues to coexist with the U.S. dollar. The exchange rate is roughly 4,100 KHR per USD and has been in that range for over two decades . Inflation is low (around 2–5% in recent years), and Cambodia’s international reserves are healthy. Dollarization remains high but slightly declining as trust in local currency gradually improves. The riel, once entirely rejected and later marginalized, is now an integral part of Cambodia’s monetary system again – a testament to the country’s recovery. Political stability and prudent economic management since the 1990s have allowed the riel to avoid further crises, even if it has not regained the preeminent status it held before 1975. The history of the Khmer riel thus reflects the broader history of Cambodia: colonial emancipation, turmoil and destruction, and a long road to regeneration.
Timeline of Key Milestones
Conclusion
The history of the Khmer riel is deeply intertwined with Cambodia’s political and economic saga. Introduced in the 1950s amid optimism of independence, the first riel navigated two decades of stability before collapsing in the chaos of the 1970s. The total abolition of money under the Khmer Rouge stands as a stark reminder of how political extremism can upend even the basic fabric of an economy. The riel’s second life since 1980 has seen great turbulence – hyperinflation and near abandonment in the early 1990s – followed by remarkable stabilization and cohabitation with the US dollar. The exchange rate regimes shifted from fixed pegs to wild floats, and now an informal peg alongside dollarization. Inflation trends swung from severe in wartime to well-controlled in the past two decades. Today, the Khmer riel endures as a symbol of Cambodian identity and sovereignty, even as the U.S. dollar largely anchors the monetary system. The impact of dollarization has been double-edged: providing stability when the riel was fragile, but also diluting the riel’s usage and the central bank’s control. Moving forward, maintaining public confidence – through continued economic stability and prudent policy – will be key if the riel is to regain a more dominant role. The Khmer riel’s journey from 1953 to 2025 thus encapsulates Cambodia’s trials and triumphs, telling a story of monetary resilience amid adversity.
Sources: Historical data and analysis have been drawn from credible economic and historical references, including the National Bank of Cambodia, United Nations and IMF reports, and academic studies. Key information on exchange rates, inflation, and dollarization was corroborated by multiple sources to ensure accuracy in this comprehensive overview.