C AMBODIA has stuck to its program of economic reform throughout 1994 despite difficult conditions, the Ministry of Finance has told the International Monetary Fund (IMF).
In a report obtained by the Post, Finance Minister Keat Chhon also highlighted Cambodia's wide-ranging economic plans for 1995, including:
- Announcing in February the removal of the prohibition of rice imports, effective from November;
- Privatizing rubber trader KAMPEXIM and petroleum distributor CKC, and preparing by March a broader list of more enterprises to be privatized;
- Introducing of a new foreign exchange law;
- Planning the total reform of the civil service;
- Consideration given to the privatization of the Foreign Trade Bank;
- Paying debt arrears to all official creditors;
- Resolving the "cross-claims" of debt between government and public enterprises.
During the next two years the government will also move to revamp the tax system.
The IMF has been told that the effective burden of taxes on consumption would be raised, including increased taxation on petroleum products. Taxes on motor vehicles would also be increased.
"Over the medium term, the government plans to work toward implementation of value-added tax (VAT)," the report said.
The government will also shed a quarter of Cambodia's 150,000 civil servants by 1997.
"In order for the reform program to be administratively and politically sustainable, the government intends... to protect groups adversely affected... with support from the World Bank and other donors," the report says.
Signed by Keat Chhon and National Bank govenor Thor Peng Leath, the report notes that in 1994 inflation had been contained, although slightly above target, and stability in the exchange rate had been restored.
"These developments owe much to a firm fiscal policy, with revenue growth strong and current expenditure under control," the report said.
The government's reform program "as a whole" remains on track, it said.
It appears the government is happy that the financial reforms - though somewhat loosened from the IMF's initial requirements - "are adequate to achieve the objectives of the program".
However, the report stresses that "corrective measures" during the next year would be taken if required to meet the objectives.
The government told the IMF that its objectives in 1995 were to achieve a seven percent growth rate and keep the annual inflation rate at around 10 percent.
Cambodia's output growth through 1994 was 5.25 percent (below the envisaged 7.5 percent). Reduced agricultural income due to flooding was cited as the reason.
Inflation - targeted at nine percent for the quarter - actually reached 20 percent.
"The high inflation has in part been associated with a surge in food prices, but in the second half of 1994, increased liquidity growth also played a role, the report said.
Gross foreign reserves, targeted at $92 million, reached a high of $131 million at the end of September.
Slower growth in domestic credit in the last quarter had been targeted to curtail price pressures.