The Ministry of Finance was preparing to halve the 1995 health budget - from

about $19 million to just $10 million - until finally persuaded not to by senior

health officials.

The top-level intervention - by both health ministry

officials and Western agencies - went as far as Prime Ministerial level, the

Post understands.

Under the new 1995 budget the Defense Ministry will be

the Kingdom's biggest spender - its $85 million [220 billion riel] represents

about one-fifth of the entire national budget.

The Finance Ministry had

prepared a draft budget based on the level of spending each ministry achieved in

1994.

The Health Ministry had been bound up by logistical problems

trying to spend last year's $19 million [50 billion riel] budget, primarily

because - unlike most under-developed countries - as much as 80 percent of its

money was earmarked for medical supplies, equipment and medicines rather than

salaries.

In its first year of operating under a centralized financial

budget, the Health Ministry struggled for the first nine months of 1994 to free

up the money to buy the equipment.

Consequently, when the Finance

Ministry began the 1995 budget round, the Health Ministry was initially

penalized for not spending its 1994 allocation.

The Ministry of Finance's

strict monetary guidelines were waived when it was decided that halving the

health budget would have been politically unacceptable.

Most other

Cambodian ministries spend the bulk of their budgets on salaries.

Although less money has been given to health this year - down $1.8

million to $17.2 million [44.8 billion riel ] - Western experts say that the

budget should be workable.

However, while they say Cambodian health

cannot be necessarily improved just by giving the ministry more money, they

point out that spending on health at just US$1.50 per head of population is

among the lowest in the world.

The World Bank's guidelines for the

minimum standard of health care is $ 12 per head of population each year.

Health centers in provincial areas have retained the same level of money

as set out in the 1994 budget. Health cuts will occur in the central area, where

national health programs and hospitals are administered.

The government

has budgeted to spend $407 million [1,058 billion riel] in 1995, up from $342

million [890 billion riel ] in 1994.

The big movers in this year's

national budget [in order of spending power] are:

• Defense - up $2.2 million to $85 million [220 billion riel]. [20.8 percent

  of the national budget, compared with 18.4 percent last year].

• Interior - up $1.5 million to $48 million [125.7 billion riel].
• Finance and Economy - up $3.3 million to $45.2 million [117.5 billion

  riel].

• Education - up $1.6 million to $ 44.9 million [ 116.8 billion].
• Public Works and Transport - down $ 2.1 million to $ 44.2 million [115.5

  billion riel].

• Agriculture - down $ 270,000 to $23.9 million [62.6 billion riel].
• Rural development - a new ministry this budget round previously under

  control of the Cabinet of Minister, $20 million [52 billion riel].

The budget for the Cabinet of Ministers has been more than halved as three

secretariats previously under its control assume ministerial status.

The

Royal Palace budget is halved to nine billion riel after reconstruction and

improvements spent last year.

The biggest increase by percentage is that

of the Ministry of Industry, Mines and Energy. In 1994 it spent just over eight

and a half billion riel. Its 1995 budget has been struck at more than 53 billion

riel.

The budget statement says that investment, agriculture and rural

development were priority areas for 1995, as was building of roads, bridges,

water and electricity supplies [despite the Public Works Ministry suffering the

biggest budget cut ].

The government has predicted growth for 1995 at

around 6.7 percent, though any repetition of the floods and drought experienced

during the latter half of 1994 would decimate that figure.

The growth

rate last year was 5.2 percent, against a forecast of 7.5 percent.

Inflation is reckoned to be ten percent for 1995. The inflation rate for

1994 blew out to more than 30 percent [against a forecast of 17.8 percent],

again directly attributable to the rice crisis.

Tax reforms, under laws

passed with the budget vote by the National Assembly, are designed to remove the

dependency on customs revenue, which makes up more than 60 percent Cambodia's

internal income.