There still is a long way to go until Cambodia issues its first sovereign bonds, the director general of the National Bank of Cambodia (NBC) told the Post yesterday.
“Some day, we need to move into that direction, together with the Asean member states,“ Nguon Sokha said yesterday.
On Friday, she announced during the Asian Development Bank (ADB)’s annual meeting in India that Cambodia is studying the possibility of issuing sovereign bonds, supported by the ADB and the Asean+3 group that includes China, Japan and South Korea. The bonds would help the government to move away from its dependence on overseas aid.
“However, capacity building and infrastructure are the biggest technical issues. Politically, we need to strengthen the confidence in the bond market to make sure it will be successful,“ Sokha said.
According to the ADB’s Senior Financial Sector Specialist Hiroyuko Aoki, it would be a good time for the Cambodian government to improve financial stability by issuing sovereign bonds.
“The main challenge of issuing government bonds is maintaining sound fiscal management. As the budget deficit is not so significant, the risk is deemed as manageable at this moment,” he said.
Not issuing government bonds may carry far higher risks, Aoki added. “As the life insurance sector and pensions are emerging, they will be seeking long-term investment opportunities that are presently unavailable.”
He also said the government bond market is a key measure to curb domestic yields and benchmark interest rates for the corporate sector, thus leading to financial support for SMEs. It would also be a major tool for adjusting money supply.
“Government bonds can be an alternative for investments for real estates and can serve as a preventive measure for financial bubbles, especially in the real estate sector,” Aoki said.