A view of numerous high-rise buildings under construction in Phnom Penh, which some consider a clear sign of economic progress. Hin Pisei
A leading economist has stated that Cambodia’s management of its debt is expected to remain strong, as the current draft law on finance for fiscal management in 2025 will allow the government to borrow up to 2 billion in Special Drawing Rights (SDR). In 2024, the government budget allowed for borrowing of 1.7 billion in SDR.
An international reserve asset created by the International Monetary Fund (IMF), an SDR is a form of IMF reserve that can be converted into cash on demand, to supplement the official reserves of member countries.
Article 2, Chapter 2 of the draft law on finance for fiscal management in 2025, which was approved by the Council of Ministers during an October 25 plenary session, states: “For fiscal management in 2025, the government is authorised to borrow up to 2,000,000,000 in SDR (2 billion SDR). Any borrowing from foreign creditors, as defined in this agreement, must be considered concessional loans, to be repaid with favourable interest rates.
The draft law also specifies that the Minister of Economy and Finance, under the authority of the prime minister, will have the exclusive right to sign agreements for borrowing from foreign creditors for public investment projects and budget support, based on the country’s general budget or government guarantees.
A report on any borrowing or guarantees must be submitted to the National Assembly (NA) and the Senate every six months.
In a November 20 announcement, the NA said the fiscal management draft law would be discussed during the third session of the seventh legislature government, on November 27.
Hong Vanak, an economist at the Royal Academy of Cambodia, told The Post on November 21 that as a developing country, Cambodia certainly requires substantial financing for investments in infrastructure development – including roads, railways, bridges, airports and ports – in order to create an attractive environment for foreign investment and promote rapid national economic growth. He added that all loans previously obtained by the government were used according to the request and have been highly effective.
“In the past, the government has seen opportunities to accelerate the country's development by seeking low-interest loans from international financial institutions, including partner countries. Most of these loans were used for public investment projects to help Cambodia catch up with other countries in the region and the rest of the world, as Cambodia lost several decades addressing its domestic crises,” he said.
According to Vanna, the financial institutions that provided loans to Cambodia include the World Bank (WB), the International Monetary Fund (IMF), the Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB).
Regarding the possibility of returning debt to creditors, he explained: “Lenders usually conduct thorough studies on the borrowing country or institution’s repayment capacity before agreeing to provide loans. Cambodia has always had a good repayment track record.”
“As a developing country, Cambodia regularly receives concessional or low-interest loans,” he added.
According to previous reports, the Kingdom’s current debt equals more than 30% of its gross domestic product (GDP).
The 2024 borrowing limit of 1.7 billion in SDR was unchanged from the 2023 figure.
According to the 2024 budget law, borrowing decisions are based on five key factors: 1) the need for public investment, particularly in infrastructure, to stimulate economic recovery and growth, 2) development programmes and projects for which concessional credit agreements will be signed in 2024, particularly public investment projects in priority sectors like infrastructure and productivity improvement, 3) loans with favourable terms, 4) Cambodia’s public debt situation, which is stable with low risk, and 5) continued improvement in the management and implementation of projects.
