Loans acquired in 2023 are predominantly highly concessional, with an average grant element of around 45%. Heng Chivoan
Cambodia disbursed nearly $520 million for debt service in 2023, a more than 10% increase from 2022, with public debt stocks exceeding $11 billion by year-end, as reported by the Ministry of Economy and Finance.
In the fourth quarter of 2023, the government made debt service payments totalling $82.14 million. In total, it paid $519.70 million for the year, comprising $495.27 million for external public debt (principal $379.67 million, and interest and other fees $115.60 million) and $24.44 million for domestic public debt (principal $23.29 million and interest $1.15 million), representing an approximate 12% increase in debt service payments compared to 2022.
Cambodia entered into new concessional loan agreements with development partners (DPs) amounting to $1.81 billion in 2023, equivalent to Special Drawing Rights (SDR) 1.339 billion.
This accounts for 79% of the ceiling permitted by law (SDR 1.7 billion), with 57% from bilateral and 43% from multilateral DPs. The volume of loans signed in 2023 marked a decrease of about 16% from the previous year.
Loans acquired in 2023 are predominantly highly concessional, with an average grant element of around 45%.
According to the ministry, the purpose of these newly signed obligations is to fund public investment projects in priority sectors that bolster long-term sustainable economic growth and enhance economic productivity.
By the end of 2023, the country’s total public debt, including previous liabilities, amounted to $11.24 billion. Of this, 99.5% ($11.19 billion) was external public debt (64% from bilateral and 36% from multilateral DPs) and 0.5% ($52.39 million) was domestic public debt.
The composition of this debt includes 46% in USD, 19% in SDR, 11% in Chinese Yuan (CNY), 11% in Japanese Yen (JPY), 7% in Euro (EUR) and 6% in local and other currencies.
The ministry maintains that the country’s public debt remains manageable, continuing to be categorised as “sustainable” and “low risk”. It said the assessment holds despite the challenges posed to the economy by the Covid-19 crisis and other external factors.
According to the ministry, maintaining the sustainability of public debt is contingent upon a robust public debt management system, including a comprehensive legal framework, well-defined policies, strategies and operational management procedures, adequate institutional and human resource capacity and advanced IT systems for managing operations and data storage.
It said these elements are crucial for debt risk analysis and ongoing monitoring.
“Sustainable, efficient and effective public debt management has significantly contributed to Cambodia’s remarkable economic growth over the past two decades. It has also enhanced the Kingdom’s ability to mobilise concessional credit for financing in priority areas.
“This is crucial for addressing the Covid-19 crisis and implementing the “Strategic Framework and Programmes for Economic Recovery and to Promote Cambodia’s Economic Growth in Living with Covid-19 in the New Normal for 2021-23”.
Hong Vanak, director of International Economic at the Royal Academy of Cambodia, spoke to The Post on March 17 about the increase in the country’s debt disbursement in 2023.
He highlighted it as an indicator of the government’s adept financial management during global economic instabilities, including the recent series of crises over the last three to four years.
“The increase in debt repayments not only confirms the capacity of the government and Cambodia’s economic growth but also bolsters lenders’ confidence in Cambodia. The economic growth situation … remains robust.”
Regarding the scale of loan expansion, Vanak noted that it is high relative to the annual GDP.
He stressed the need for the government to devise new strategies to attract more investment from both domestic and foreign private sectors, particularly in infrastructure development through build-operate-transfer (BOT) frameworks.
“As Cambodia is a developing country, the demand for public investment funds is substantial, for instance, in building infrastructure and human resources to create jobs. Attracting private sector investment under BOT schemes would be advantageous,” he added.
Vanak emphasised that the country must strive to enhance its potential to attract more tourists and foreign investors, thereby increasing national income.
The government plans to augment its public debt stocks by approximately $108 million in 2024 through the issuance of sovereign bonds and about SDR 1.7 billion from DPs, maintaining the ceiling set in 2023, according to the ministry’s Budget in Brief for Fiscal Year 2024.
