THE International Monetary Fund (IMF) has frozen its funding to Cambodia because

money from the sale of State assets is not finding its way to the Ministry of Finance.

The freeze comes at an acutely embarrassing time for the Royal Government - just

six weeks away from the Tokyo donors meeting when it will be asking for $1.6 billion

in aid, and at the same time Finance Minister Keat Chhon is on a European tour drumming

up support from aid donors.

The "million meter" timber deal recently brokered between the Government

and 20 Thai companies was clearly the last straw for the IMF, which insists on a

transparent and centralized State budget as a condition for its support.

Michael Kuhn, who is in charge of the IMF Cambodia program, recently visited Phnom

Penh to give a letter to Prime Ministers Prince Norodom Ranariddh and Hun Sen.

The letter - personally signed by IMF managing director Michel Candessus - requested

help from the PMs "in order to enable the IMF to continue its support."

The Candessus letter - an explicit and in diplomatic terms thinly veiled threat by

the IMF to pull out of Cambodia - has been backed up by the withholding of a second

$20m IMF loan installment that should have been paid around March this year.

A senior Ministry of Finance official in Phnom Penh said he was aware of the IMF

concerns because "money was not being put into the Treasury."

He also said he was aware it was "because of the big logging export deal on

the Thailand border."

"The IMF asked for transparency. Agriculture Minister Tao Seng Huor and Keat

Chhon, before he left, were invited to see the First Prime Minister to clarify the

logging deal," he said.

He said Seng Huor told Ranariddh the deals were in principle only, and that the Ministry

of Agriculture would ask the Thai firms to "contact the Forestry Department...

and follow the [Cambodian] rules and law."

IMF resident representative in Phnom Penh, Joshua Charap, confirmed Kuhn's recent

visit as "part of the on-going policy dialogue between the IMF and the Royal

Government."

When asked about the review process in Washington, he said: "There have been

some minor delays in coming to a conclusion in the policy package.

"It's clear in that there has been rapid progress especially with respect to

macro-economic stability, but there have been some delays, particularly structural

measures. For the most part the Government has been on track."

Charap also said he expected a full IMF team to return to Cambodia after the July

Consultative Group meeting to "continue the policy discussion with the Government."

One informd source said that Cambodia is not going to see any more money from the

IMF till well after the CG meeting, and probably not till September at the earliest

- and only then if the Government acts on concerns about budgetary transparency.

He said Cambodia will have to wait till the Tokyo meeting to guage how other donors

will react to the IMF initiative.