The government has reserved around $3 billion to cope with a possible suspension of the Kingdom’s access to the EU’s preferential “Everything But Arms” (EBA) agreement.
Hav Ratanak, the director-general of the Ministry of Economy and Finance’s General Department of Budget said this on Thursday during a press conference on the National Progress and Equitable Dividend Distribution at the Council of Ministers.
“The government did not spend all of the revenue collected from taxes. The state has enough savings to deal with any possible crisis in the future.
“So far, the state and the prime minister have already raised around $3 billion to mitigate any shock from a [possible] withdrawal,” he said.
The ministry’s under-secretary of state Phan Phalla said Cambodia had maintained economic growth of around seven per cent for more than two decades, with hardly any country in the region coming close to this.
He said Cambodia’s economic growth would probably drop to 6.5 per cent next year due to the possible withdrawal of EBA and a global economic slowdown caused by the Sino-US trade dispute.
“The growth is still indicative of Cambodia’s strength and the government’s preparedness,” Phalla said.
The EU launched the EBA withdrawal procedure on February 12 after citing “a deterioration of democracy [and] respect for human rights” in Cambodia.
The European Commission completed its report on November 12, following a three-month investigation that ended on August 12, and gave the government a month to respond.
Economics lecturer at the Royal University of Phnom Penh Kim Veara said the $3 billion allocation was positive and reflected the government’s commitment to protecting the Kingdom’s economic growth.
“I think the budget reservation is good because it would help maintain economic growth for a while as we recovered from any withdrawal,” he said.
Acleda Bank president In Channy on Tuesday said the Kingdom’s banking sector will remain strong and will not be directly affected by the potential suspension of trade privileges.
“I don’t think the EBA issues will hinder the growth of the economy as a whole because it is just one of the factors [contributing to] it.
“All investors know that one day it [EBA access] will be gone. What is important is the soundness of the regulatory frameworks that allow their investments here to be sustainable as our economy remains strong, [growing annually at] around eight per cent over the last two decades.
“Another important factor is our strategic partnership with China. The government just announced that we will sign a free trade agreement in December. We will benefit from the partnership, and it will [help] sustain the economy in the long term,” Channy said.
Cambodia is the second-largest beneficiary of EBA trade preferences, accounting for 18 per cent of all imports to the EU market under the EBA scheme last year, the European Commission said on November 12.
The Kingdom’s exports to the EU last year totalled €5.3 billion ($5.8 billion) – 95 per cent of which entered the EU duty-free.