An official for the International Monetary Fund (IMF) has told the Post that plans

to lend Cambodia about $70 million are contingent on the rescheduling of overdue

payment of debts to the former Soviet Union and the United States.

According to the official, when the government commits itself to repaying those debts

it will receive a loan that it can spend on any projects it chooses - but the IMF

is urging the government to increase social spending, invest more in agriculture,

and tackle corruption.

At a news conference on May 11, Jeremy Carter, IMF Asia and Pacific department adviser,

said Cambodia has experienced strong growth in the past year, but needs to have a

careful fiscal plan in order to continue improving the economy.

Thanks to a bumper year in agriculture, Cambodia experienced exceptional economic

growth in 2005, with the country's real gross domestic product (GDP) increasing by

13.1 percent.

Rice exports grew by more than 40 percent; however they are still insignificant when

compared with the billion-dollar garment industry, which grew 11 percent.

Carter said that in the past, economic growth had not given rural people the same

increase in living standard as those living in urban centers. Despite the boom in

agriculture, a huge income gap continues to separate rural people and their urban

counterparts.

"The percentage of rural people living below the poverty line is in the high

30s, whereas urban poverty is at 5 percent," Carter said.

The IMF named three sectors as the backbone of Cambodia's non-agricultural economy:

tourism, the garment industry and construction. According to John Nelmes, resident

representative of the IMF in Cambodia, these areas form a narrow base of growth that

will benefit urban, rather than the rural, economies.

In order for everyone to reap the benefits of a strong economy growth must be broadened,

Nelmes said, particularly through developments that strengthen the agricultural sector

such as land management reforms and improvements in irrigation.

The IMF cancelled $82 million worth of Cambodia's debt in January, and the government

has so far allocated $6 million of that money to development funding, specifically

irrigation schemes in the eastern provinces. The IMF said it has urged the government

to identify further projects on which debt relief money can be spent.

Confronting the problem of corruption is another area where the IMF wants to see

more progress from the government.

"We support the passage of an anti-corruption law, and this was a major issue

at the consultative group meeting [with Prime Minister Hun Sen]," Carter said.

Nelmes said that although good progress has been made on such a law, the current

draft does not adhere to international standards for anti-corruption measures and

strengthening in a few key areas would increase its effectiveness. The IMF expected

the government to submit a law to the National Assembly within the next few months.

Nelmes said the Cambodian government must also catch up on longstanding debts to

its two biggest creditors, Russia and the United States, before a loan can be granted.

Cambodia owes a total of approximately $1.8 billion to these two countries, and it

is behind on repayments.

"The IMF's legal rules do not allow the IMF to lend to any member country when

there are arrears to official creditors outstanding."

Nelmes said the government would need to make arrangements to deal with the situation

before its loan request can be formally considered by the IMF.

Carter also warned against high expectations for future growth after last year's

impressive 13 percent GDP increase. He said the IMF is less optimistic about growth

for 2006 than the Cambodian government, and predicts that this year's growth will

be around six percent.

The IMF was established by international treaty in 1945 to promote the world economy.

Headquartered in Washington, DC, it is governed by its 184 member countries.