A view of the Phnom Penh skyline from one of the capital’s tallest buildings on April 20, 2023. Hong Menea
The World Bank highlighted Cambodia’s substantial progress in the effective allocation of public funds towards social services, resulting in enhanced health and education outcomes, and noted improvements in the management of public finances.
The bank’s public expenditure review, compiled at the behest of the Ministry of Economy and Finance and released on February 15, suggested that the country could further leverage its increased public spending in the social services sector to achieve more robust outcomes in health and education.
“As a result of improved revenue collection and prudent management of public finances, facilitated by Cambodia’s consistent economic growth between 1995 and 2019, Cambodia has been able to mitigate the negative impacts of Covid-19 and spend more in social sectors,” it stated.
“The upsurge in spending was driven partly by across-the-board salary increases. The average public sector wage now surpasses that of the private sector for similar jobs,” said the bank.
The report noted that salary increases have not yet led to improved results, especially in social sectors. It found that while education outcomes have seen marginal improvement, they still lag behind regional standards.
“Public health facility usage is low and Cambodians spend more on medical treatment than the regional average, while public service infrastructure could greatly benefit from enhancements,” it added.
Maryam Salim, World Bank country manager for Cambodia, stated in the report that for sustainable and inclusive long-term growth, the country must enhance the effectiveness of its public service expenditures.
“This involves improving spending efficiency through more strategic budget management, tying salary hikes to performance, and more equitably distributing resources among different government levels,” she explained.
The report also detailed the country’s Budgetary Central Government (BCG) financial performance for 2023.
According to the report, the central government collected nearly $6.2 billion in domestic revenue, equating to over 96% of the 2023 annual budget law (BL), while total expenditures reached nearly $7.4 billion.
This included 21.219 trillion riel ($5.21 billion) in tax revenue, representing 84.17% of the total; grants of 1.456 trillion riel ($358.45 million), or 5.78%; and other income of 2.535 trillion riel ($622.35 million), equating to 10.06%.
Overall revenue performance decreased by 4.69% year-on-year, with tax revenue down by 4.43%, grants by 24.08%, and other revenue up by 7.69%. The central government’s spending reached 30.076 trillion riel (about $7.38 billion) in 2023, or 91.45% of the BL.
This includes expenses totalling 21.259 trillion riel ($5.22 billion), accounting for 70.68% of the budget, and the net acquisition of non-financial assets amounting to 8.817 trillion riel ($2.16 billion), representing 29.32%.
Compared to the previous year, 2022, outlays increased by 11.18%, with expenses rising by 10.04% and the net acquisition of non-financial assets growing by 14.02%.
The World Bank suggested the country could structure the next phase of its public financial management reform to build the fiscal resilience necessary to meet long-term spending requirements and respond to climate challenges.
“This could be achieved by strengthening the links between planning and budgeting and between spending and performance outcomes. Improving accountability and performance assessment in the public sector and strengthening capital budget management will also contribute to greater spending efficiency,” it stated.
The bank also noted that authorities could enhance public health delivery by addressing fundamental quality issues in services, promoting the use of healthcare facilities and ensuring equitable access for the economically disadvantaged.
“To ensure spending on education is more efficient, authorities can strengthen processes for recruitment, deployment and training of teachers and by making operating funds more responsive to the needs of each school,” it suggested.
The review also recommended improving operational competence, human resource management and staff capacity across sub-national administrations to enhance the impact of public spending.
