A DRAFT of the $515 million national budget for 1998, forwarded to the National Assembly,

allots more than $200 million directly to the military and police.

The largest single proposed expenditure is slated for defense and security, which

are to receive 43.6% of the proposed budget unless alterations are made by the National

Assembly, according to a copy of the budget obtained by the Post.

About 20% of the proposed budget is slated for health, agriculture, education and

rural development.

But Minister of Finance Keat Chhon defended the budget from criticism that it showed

mistaken priorities, saying that military expenditures have actually decreased as

a percentage of the budget as compared to the 1996 proposal.

"As the overall size of the budget has increased, the proportion to be spent

on defense and security has decreased," he said Nov 26, pointing out that about

50% of last year's official expenditures went to military and security expenditures.

"The government's policy is to try to increase revenue and cut down on expenses.

One factor aimed at stabilizing the macro-economic situation is the balance of revenue

and expenditures. Until now there has not been any increase in expenditures,"

he said.

While the size of the proposed budget has increased in riels, in which the budget

is calculated, it has decreased in dollar terms as the riel has fallen nearly 20%

against the dollar in the last year - from an average of about 2,700 riels to the

dollar to the present rate of 3,400.

The fall in the riel means that the percentage of government revenue generated inside

Cambodia has decreased, while donor nations now provide a larger slice of the overall

budget than they did before, according to former Finance Minister Sam Rainsy.

"There is no solid and serious base for the 1998 budget. It is a budget where

the government cheats too much. As former Minister of Finance, I know how it is done.

I tried to put the house in order, [but now] the cheating has become the rule,"

he said.

Rainsy also said that the 1998 budget provisions are unlikely to be respected if

the proposed budgets of previous years are any precedent. "There were great

gaps between the provisions and the reality."

He claimed that next year's budget is likely to be further off the mark than in past

years as huge monetary support from the World Bank, France and Japan, used to balance

the government's payments in the last two years, have been ended, including a $22-23

million support from the Japanese program which he said had run out in recent weeks.

At press time, Japanese officials could not be reached for comment.