Logo of Phnom Penh Post newspaper Phnom Penh Post - IMF reviews 1995 forecast as trends worsen

IMF reviews 1995 forecast as trends worsen

IMF reviews 1995 forecast as trends worsen

E xperts say it is too early to say whether an apparent worsening of Cambodia's economy will continue, or what effect the dismissal of Sam Rainsy as finance minister will have.

Rainsy, in a November 21 press conference, criticized Cambodia's economic management since his sacking a month earlier and predicted tough times ahead.

The International Monetary Fund senior representative in Cambodia, Reza Vaez-Zadeh, said gross domestic product growth was dropping because of smaller rice crops caused by flooding and the early end to the rainy season. Inflation appeared to be rising.

But the IMF was in the process of reassessing its forecasts for next year, and he could not say whether the trends were likely to continue.

Asked about the impact of Rainsy's departure, he said: "He only left a month or two ago. I don't know to what extent you can say that has had an effect."

Rainsy, at his press conference, criticized the Cambodian People's Party's grip on the top economic posts in the government.

"Former communists are not good managers. It is very dangerous to leave the whole economy of Cambodia in the hands of former communists."

He said the first official decision taken by his successor, CPP member Keat Chhon, had been to borrow $4.4 million from the National Bank of Cambodia - the maximum allowed for in the IMF's programme for the nation.

Rainsy said that in his 15 months in office, he had never used such loans to finance the budget.

He said Cambodia's economic indicators were looking gloomier for the near future, for various reasons.

He predicted GDP growth for 1994 would be around 5 per cent, less than 1993's 6 per cent and the initial IMF forecast of 7.5 per cent for this year.

He blamed reduced agricultural production, caused by flooding and insecurity, and lower private investment than expected.

Inflation was rising and likely to be about 24 per cent for the whole of 1994, largely because of the sharp rise in rice prices, while the exchange rate was being held stable only because of huge injections of aid for budgetary support.

Rainsy alleged that government revenue was falling, especially customs revenue because of a "noticeable increase" in smuggling over recent months. Money from timber exports had also declined dramatically since the co-prime ministers transferred authority for them to the military.

At the same time, government expenditure was rising sharply, particularly in the military sector - because of factors like purchases of weapons from overseas - which accounted for more than 50 per cent of total spending.

The cash position of the National Treasury was deteriorating - in September it had cash reserves worth 80 billion riels; by mid-November it had 20 billion riels, barely enough to cover one month's salaries of civil servants and the military.

Rainsy predicted a "difficult" national budget next year.

The extra money allocated by the Revised Budget Law just passed by the National Assembly - including an extra $16 million to the military - was unlikely to be enough to cover spending this year.

He alleged the government was effectively running two budgets - the official state one and another one for the army.

He appealed to the international community to continue to provide generous support to Cambodia, but to do so with "open eyes and ears". Aid should be given only with careful monitoring, he said.

The Royal Government had to earn and encourage further assistance by keeping a tight control on the budget, ensuring contracts with the private sector were negotiated openly, and directing all profits from timber exports into the National Treasury.

"Transparency, accountability and the rule of law" were becoming casualties of a government which was increasingly secretive in its decision-making, he said.

He urged a concerted fight against corruption within the government, and repeated allegations that private companies were being favored for contracts over better competitors.

Rainsy concentrated his attack on the CPP, making no direct mention of his own Funcinpec party, saying the CPP was making money from the dubious sale of state assets and timber and rubber, and from smuggling activities.

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