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Logo of Phnom Penh Post newspaper Phnom Penh Post - State coffers swell with financial reforms: govt

State coffers swell with financial reforms: govt

Improved tax collection and money management has boosted state coffers by an average of 23 percent each year since 2005, satisfying a key donor demand for better fiscal management, senior officials said while announcing the completion of the first round of public sector finance reforms.

Just over $1 billion was collected in 2007, up from $656 million two years earlier, Finance Minister Keat Chhon said on May 28 at the conclusion of an annual review of the financial sector.

During the same period, foreign currency reserves doubled and expenditures increased an average of 20 percent, indicating a reversal from chronic cash shortages to surpluses, he said.

“We have to use money to grow money,” Prime Minister Hun Sen told meeting participants, including officials from international financial institutions.

The International Monetary Fund’s resident representative, John Nelmes, called the government’s fiscal turnaround “commendable,” saying the new fiscal procedures had kept spending largely in line with the budget.

“Sound fiscal outcomes such as this are critical for macroeconomic stability, particularly now, to help combat domestic inflation pressures,” he said.

Cambodia is wrestling with double-digit inflation which economists say is not likely to ease amid rising global oil and food prices that have driven up the cost of local consumer goods by as much as 30 percent, leaving many staples out of reach for the country’s poorest.

Nelmes said many of the reforms introduced during the first stage of the government’s financial review program were complex and affected some fundamental core government functions.

“Because of this, it is not surprising that their implementation remains ongoing and will need continued attention during stage two,” he said, adding that continued attention had to be paid to further improvements in financial reporting and budget transparency.

Chhon acknowledged the challenges ahead for Cambodia, which has emerged from decades of civil strife as one of the region’s most corrupt countries, losing an average of $350 million to graft each year, according to the think tank Economic Institute of Cambodia.

“The more we do, the more we come to understand ... the demanding nature of the task and challenges we have set ourselves,” Chhon said.

Greater transparency remains a key platform of opposition politicians, who have dismissed the government’s fiscal reforms.

Sam Rainsy Party lawmaker Yim Sovann, speaking to the Post on May 29, said the government’s improved revenue collection was not a clear indication that it was moving ahead with better financial management.

“The government has failed to reform financial management,” said Sovann, describing the amount of tax revenue collected as “very small.”

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