Logo of Phnom Penh Post newspaper Phnom Penh Post - Belt and Road could bring risks for Cambodia debt

Belt and Road could bring risks for Cambodia debt

Xi Jinping, president of China, and Prime Minister Hun Sen shake hands in October 2016.
Xi Jinping, president of China, and Prime Minister Hun Sen shake hands in October 2016. Hong Menea

Belt and Road could bring risks for Cambodia debt

China’s financing of Belt and Road Initiative projects in Cambodia could lead to increased debt distress, according to a recent analysis, though the Kingdom’s low overall debt makes it unlikely to default in the near future.

According to a policy paper released by the Center for Global Development, Cambodia will likely see a significant rise in debt to China as a result of the Belt and Road Initiative. At the end of 2016, Cambodia’s total public and publicly guaranteed debt was $6.5 billion, a relatively low percent of the country’s $20 billion GDP. About half of that $6.5 billion debt was owed to China, according to the report.

Miguel Chanco, lead Southeast Asia analyst for the Economist Intelligence Unit (EIU), noted that the report was accurate regarding the risks to Cambodia, but also said any prediction of future debt levels was complicated by the overall lack of transparency of BRI projects.

“Our estimates put the country’s public debt stock at around 35 percent of GDP, which is well below the median for Asean and emerging markets at large,” Chanco said. “Having said that, I am concerned about the lack of transparency in many of China’s projects in Cambodia, as it makes it difficult to determine the latter’s overall sovereign debt commitments.”

The report also makes note of the uncertainty of potential BRI projects. While publicly declared projects at the end of 2016 were predicted to leave Cambodia indebted to China by an additional $3.5 billion, the report’s “Limitations of Methodology” section notes that number could end up being much higher.

For example, China has proposed a plan to “develop over two million kilometers of national expressways [in Cambodia] by 2040”, which would cost an estimated $26 billion and could leave the Kingdom significantly more in debt to China.

The EIU forecasted a rapid rise in Cambodia’s external debt in the next few years, according to Chanco.

“We expect the country’s total foreign debt stock to rise to $17 billion by 2020,” he said.

MOST VIEWED

  • EU parliament’s 13-point vote to decide on possible sanctions

    The European Parliament is due to vote on Thursday on a 13-point resolution on Cambodia – which includes a call for the treason charges against bailed opposition leader Kem Sokha to be dropped – a threat that could see the EU enforce a range of sanctions against

  • Government hits back at threats to pull EBA, suspend UN seat

    The spokesman for the ruling Cambodian People’s Party (CPP) has said the government is in no way concerned after the European Parliament gave it three months to reverse what it called the “systematic repression of the political opposition”. Ignoring the ultimatum could mean facing

  • Chinese influx pushing locals, Westerners out of Preah Sihanouk

    Some within the Kingdom’s tourism industry have speculated that the recent influx of Chinese visitors may hinder domestic tourism as the price of accommodations in the coastal city of Sihanoukville continues to rise. Preah Sihanouk province, which has become a hotbed for Chinese investment

  • Sar Kheng: Sokha requested security

    Interior Minister Sar Kheng on Sunday revealed the story behind the transfer of former opposition party leader Kem Sokha from Trapaing Phlong prison in Tbong Khmum province to his house in the capital. Speaking at the ruling Cambodian People’s Party (CPP) headquarters in Prey