The recently-approved draft law on government securities will pave the way for the State to employ a new type of financial instrument and mobilise domestic financing, diversify its capital portfolio and reduce external borrowing, Securities and Exchange Commission of Cambodia (SECC) director-general Sou Socheat said on Monday.

The law was greenlit at a Cabinet meeting presided over by Prime Minister Hun Sen on Friday, the minutes from the meeting revealed.

It said: “Since 1993, the public debt management of the Royal Government of Cambodia has been cautionary, accurate and strict.

“Given the current context, issuing government securities presents a new opportunity and priority for Cambodia.

“This is taking into consideration the internal and external challenges that could adversely affect the public debt situation and the clear goal of diversifying funding sources in compliance with economic development and the soon-to-come graduation from [the UN’s Least Developed Country (LDC)] status.”

Government securities are a vital financial tool for governments to raise financing from the domestic private sector and from abroad for socio-economic development, the minutes said.

It added: “The government has drafted a new Law on Government Securities to replace the old one from 2007.

“The revised law better responds to the technical aspects of income and expenditure management – such as adopting new regulations on Cambodia’s capital market system – and the current needs of the private sector.”

The current Law on Government Securities was issued by Royal Code No NS/RKM/0107/001 on January 12, 2007 and remains in force today.

With the collaboration of private sector financiers, SECC’s Socheat said government securities would be a boon for national development.

He said: “Approval of the draft law lays the groundwork for the government to use this type of financial instrument and raise funds when there is a need.

“It can also help the government reduce foreign loans and provide it with options of how much to borrow from foreign sources and how much to issue to raise the necessary amount of funds from the domestic and foreign private sectors.”

Cambodia Securities Exchange (CSX) vice-chairman Ha Jong-weon said the government is preparing more regulation framework on government bond issuance, listing, trading and depository.

He said: “We hope that the government securities will be listed and traded on the CSX, and we are ready on the infrastructure.

“When the government needs money for any investment or expense, they can consider issuing bonds. It is an alternative choice of quick financing that does not need any requirements but the country credit.

“Local financing will further stabilise the local economy and hasten development. The government will also have more power on the international stage when fund borrowing from other countries is low.”

From 1993 to 2017, Cambodia borrowed a total of $9.685 billion through concessional loans with development partners, the Ministry of Economy and Finance reported.

This is equivalent to 43.7 per cent of the Kingdom’s $22,158,209,503 gross domestic product (GDP) in 2017, as shown by World Bank figures.

The finance ministry said the Kingdom borrowed $6.377 billion from other governments, of which a whopping $4.05 billion came from China.