Logo of Phnom Penh Post newspaper Phnom Penh Post - Cambodia at low risk of debt distress: IMF

Cambodia at low risk of debt distress: IMF

Cambodia at low risk of debt distress: IMF

Cambodia's external public debt is well within acceptable limits, but remains vulnerable to financial shocks such as export slowdowns or exchange rate fluctuations, the International Monetary Fund (IMF) said in its latest assessment of the Kingdom’s economy.

“Cambodia’s debt distress rating remains low with all debt burden indicators projected to remain below the respective thresholds,” the IMF said in a staff report for its 2015 Article IV consultation.

The debt-distress rating was determined as part of an IMF Debt-Sustainability Analysis and reflects the results of baseline projections and stress tests.

The analysis is intended to help international creditors tailor their financing terms while allowing borrowers to balance their need for funds with their ability to repay their debts.

According to the IMF report, Cambodia’s key indicators – including debt-to-GDP, debt-to-exports and debt-to-revenue – are projected to remain below their respective warning-level thresholds through 2035. It warned, however, that “large exchange rate or export shocks could potentially have a major impact on the debt dynamics”.

Cambodia currently has about $5.5 billion of external public debt, representing about 33 per cent of GDP, according to the World Bank. External debt disbursement is projected to average about $550 million annually over the next five years, or about 2.5 per cent of GDP.

Hiroshi Suzuki, CEO and chief economist at the Business Research Institute for Cambodia, said size of the Kingdom’s external public debt is no cause for concern.

“The level of debt of Cambodia is one of the lowest among major developing countries,” he said.

By comparison, he noted, the debt-to-GDP ratio is 196 per cent for Greece, 61 per cent for Vietnam and 43 per cent for Thailand.

Cambodia’s low debt-distress rating signifies the country may still have room to borrow to finance its economic growth and large-scale infrastructure projects.

The government’s list of multilateral creditors includes the Asian Development Bank (ADB) and International Fund for Agricultural Development (IFAD). It has not borrowed from the IMF in over a decade, while the World Bank suspended all new lending to Cambodia in 2011 due to a lack of resolution for families forcibly evicted due to a World Bank-funded project.

Significantly, the share of bilateral debt in Cambodia’s total external public debt increased from 50 per cent in 2009 to about 70 per cent today.

This rapid growth reflects an increasing dependency on China as a creditor, with Beijing accounting for about 90 per cent of new bilateral loan disbursements during the past three years, according to the IMF report.

Economist Srey Chanthy said the heavy reliance on China – which typically offers a similar grace period and slightly higher interest rate than Western creditors – is due to its hands-off approach.

“China’s loans have no conditions or strings [whereas] bilateral loans from Western countries and Japan always have lots of requirements, including social and environmental safeguards,” he explained.

Chanthy said the Cambodian government could return to multilateral borrowing from the IMF and World Bank, but it also has a number of less-onerous options, such as continuing to borrow from the ADB and IFAD, or borrowing from the Chinese-led Asian Infrastructure Investment Bank.

MOST VIEWED

  • Virus tops 84 with new cases in S’ville

    The Ministry of Health on Sunday night confirmed another 31 cases of coronavirus infections, bringing the Kingdom’s total to 84 and it highest daily tally. There have been no fatalities thus far. The latest cases were found in 29 French tourists and their two Cambodian tour guides

  • Kingdom’s virus toll tops 84, Cambodians in Thailand rush home

    The Ministry of Health on Sunday night confirmed another 31 cases of coronavirus infections, bringing the Kingdom’s total to 84 and its highest daily tally. There have been no fatalities thus far. The latest cases were found in 29 French tourists and their two Cambodian tour guides

  • NBC calls for cashless payments

    The National Bank of Cambodia (NBC) has urged government ministries, financial institutions and the public to conduct cashless payments via electronic systems where possible to combat the spread of Covid-19. “To contribute to the prevention of Covid-19, the National Bank of Cambodia encourages financial institutions

  • Mysterious century-old structure found at bottom of Angkor pond

    The Apsara National Authority (ANA) has discovered a mysterious 1,000-year-old structure of a wooden building at the bottom of a pond after the Angkor Wat temple’s conservation team completed restoring its northern cave. The deputy director at ANA’s Angkor International Research and Documentation

  • CEO held for fraud in Siem Reap

    Over 200 individuals gathered in front of the Siem Reap Provincial Court last week to ask that Dim Suonnath, the CEO of a real estate company being held for fraud, take responsibility for compensating some 2,000 residents who invested with him. The request was denied. Suonnath responded

  • Ministry calls for home schooling

    Minister of Education, Youth and Sport, Hang Chuon Naron appealed to parents of students to provide home education in a proper environment and help them obtain more learning materials. The ministry also allowed schools to take a premature vacation after several people tested positive for