An official for the International Monetary Fund (IMF) has told the Post that plans
to lend Cambodia about $70 million are contingent on the rescheduling of overdue
payment of debts to the former Soviet Union and the United States.
According to the official, when the government commits itself to repaying those debts
it will receive a loan that it can spend on any projects it chooses - but the IMF
is urging the government to increase social spending, invest more in agriculture,
and tackle corruption.
At a news conference on May 11, Jeremy Carter, IMF Asia and Pacific department adviser,
said Cambodia has experienced strong growth in the past year, but needs to have a
careful fiscal plan in order to continue improving the economy.
Thanks to a bumper year in agriculture, Cambodia experienced exceptional economic
growth in 2005, with the country's real gross domestic product (GDP) increasing by
Rice exports grew by more than 40 percent; however they are still insignificant when
compared with the billion-dollar garment industry, which grew 11 percent.
Carter said that in the past, economic growth had not given rural people the same
increase in living standard as those living in urban centers. Despite the boom in
agriculture, a huge income gap continues to separate rural people and their urban
"The percentage of rural people living below the poverty line is in the high
30s, whereas urban poverty is at 5 percent," Carter said.
The IMF named three sectors as the backbone of Cambodia's non-agricultural economy:
tourism, the garment industry and construction. According to John Nelmes, resident
representative of the IMF in Cambodia, these areas form a narrow base of growth that
will benefit urban, rather than the rural, economies.
In order for everyone to reap the benefits of a strong economy growth must be broadened,
Nelmes said, particularly through developments that strengthen the agricultural sector
such as land management reforms and improvements in irrigation.
The IMF cancelled $82 million worth of Cambodia's debt in January, and the government
has so far allocated $6 million of that money to development funding, specifically
irrigation schemes in the eastern provinces. The IMF said it has urged the government
to identify further projects on which debt relief money can be spent.
Confronting the problem of corruption is another area where the IMF wants to see
more progress from the government.
"We support the passage of an anti-corruption law, and this was a major issue
at the consultative group meeting [with Prime Minister Hun Sen]," Carter said.
Nelmes said that although good progress has been made on such a law, the current
draft does not adhere to international standards for anti-corruption measures and
strengthening in a few key areas would increase its effectiveness. The IMF expected
the government to submit a law to the National Assembly within the next few months.
Nelmes said the Cambodian government must also catch up on longstanding debts to
its two biggest creditors, Russia and the United States, before a loan can be granted.
Cambodia owes a total of approximately $1.8 billion to these two countries, and it
is behind on repayments.
"The IMF's legal rules do not allow the IMF to lend to any member country when
there are arrears to official creditors outstanding."
Nelmes said the government would need to make arrangements to deal with the situation
before its loan request can be formally considered by the IMF.
Carter also warned against high expectations for future growth after last year's
impressive 13 percent GDP increase. He said the IMF is less optimistic about growth
for 2006 than the Cambodian government, and predicts that this year's growth will
be around six percent.
The IMF was established by international treaty in 1945 to promote the world economy.
Headquartered in Washington, DC, it is governed by its 184 member countries.