Washington, DC

The Cambodian government must raise its tax revenue intake if it is to stay on a sustainable path toward development, International Monetary Fund officials said in Washington during the fund’s 2012 Spring Meetings last week.

Tax collection is low when compared to the country’s gross domestic product, Olaf Unteroberdoerster, senior economist at the IMF’s Asia and Pacific department, said.

“It will be necessary to raise the revenue performance of the government so that expenditure can be financed,” he said.

Cambodia’s ability to build its fiscal space, or the capacity to finance education, health and other public services, will be a major task for the government in the medium-term, IMF director of the Asia and Pacific Department Anoop Singh said during a press conference in Washington last week.

A plus for Cambodia’s development was its debt-sustainability level, which was stable according to the IMF and the Asian Development Bank.

“[Cambodia’s] account debt level is fairly prudent and the government has a good track record of prudent fiscal and debt management,” Unteroberdoerster said.

The low debt level – US$2.5 billion, or about 22 per cent of GDP – would act as a buffer against the external shock that would result from continued economic crisis in the West and a potential drying up of garment orders, he said.

Further diversification away from garment manufacturing, however, was still needed.

A recent ADB report also said Cambodia’s debt levels were sustainable, although ADB and IMF economists have noted the potential risks associated with build-operate-transfer projects, in which government-to-government agreements were sometimes unclear.

To contact the reporter on this story: May Kunmakara at [email protected]