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Gov’t implements austerity measures to assist recovery

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The document was signed by Prime Minister Hun Sen and directed all state institutions to make budget and action plans. Facebook

Gov’t implements austerity measures to assist recovery

Cambodia plans to reduce expenses in all sectors and government institutions as part of a move to assist the economy to recover from the Covid-19 outbreak, a 22-page strategic plan for 2021-2023 unveiled last Wednesday said.

In the circular, the government said the economy has fallen by -1.9 per cent this year, but it expects it to rebound and grow by 3.5 per cent next year.

The document was signed by Prime Minister Hun Sen and directed all state institutions to make budget and action plans.

The document said Cambodia, like the rest of the world, had been heavily affected economically by the impact of Covid-19.

“However, according to reports, the economy in 2021 is predicted to rise by 3.5 per cent amid a slow increase in economic activities,” said the circular.

The key sectors that are primed for a 2021 recovery include agriculture (1.6 per cent expected increase), the industrial sector (4.1 per cent), and the service sector (3.6 per cent).

Public administration expenses will be reduced by 6.4 per cent in 2021 compared to this year’s budget. The expected 2021 administrative expenses account for 1.99 per cent of the country’s gross domestic product (GDP).

Social affairs expenses for next year are planned to account for 6.14 per cent of the GDP – down 11.3 per cent compared to this year.

The government will continue to focus on social and health conditions by supporting equity programmes and national protection schemes.

Expenses in the economic sector will be set at 6.42 per cent of the GDP, down 5.3 per cent compared to this year. These expenses will be used to diversify the economy, increase competitiveness in the private sector and attract public investment.

“The budget package includes vocational training for workers, support for workers whose factories have been suspended, cash transfer programmes, and social support for vulnerable people,” the circular said.

The amount to be dedicated to each programme has yet to be determined and will be decided by the government at a future date.

It said all state institutions are allowed to recruit new staff in order to replace those who retired, but new recruits cannot exceed the number of retired workers. Base salaries, seniority payments, support for contract officials and pension funds must be kept at the levels set for 2020.

Financial bonuses of 50,000 riel ($12.5) which are usually given twice to public officials during Khmer New Year and Pchum Ben Festival will not be given out in 2021.

Hong Vanak, an economic researcher at the Royal Academy of Cambodia said on Sunday that the expenses the government has planned are based on the long-term impacts of Covid-19.

He said civil servants are not complaining about the government’s plan to keep their salary unchanged. Some had even contributed their salary to the state in the effort to fight Covid-19.

Vanak said a vaccine against the virus will be a decisive factor that will determine how fast the economy can improve. He said if there is no vaccine available by the end of this year, it will be hard for the government to achieve its goal of 3.5 per cent economic growth.

He said the tourism sector has been the hardest hit during the pandemic and expressed hope that the manufacturing sector will experience a big leap towards recovery in 2022.

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