A senior official at the Ministry of Foreign Affairs and International Cooperation highlighted the positive aspects of loans used in Cambodia, emphasising that the country’s debt remains at a sustainable level. He noted that debt traps, such as the one in Sri Lanka, did not start with China.

The remarks were made by foreign ministry secretary of state Un Kheang during his speech at the third International Relations Forum on Changing Global Order and the Role of Superpowers for Global Peace, Security and Prosperity, held today, September 4 by the Royal Academy of Cambodia (RAC).

Kheang, who specialises in economic and political science, discussed the debt situations of several countries, including Sri Lanka, before addressing Cambodia’s own debt position.

Citing Singaporean Minister for Foreign Affairs Vivian Balakrishnan, who noted that “foreign policy begins at home”, Kheang explained that Sri Lanka's debt crisis did not begin with China.

“Sri Lanka was trying to repay its loans from the World Bank and other creditors. When the loans matured, the Sri Lankan government was unable to repay them and turned to China for loans to cover its existing debt,” he said.

“What I mean by ‘policy starts at home’ is how a country uses the loans it receives from multilateral or bilateral institutions and for what purpose,” he added.

As of the first quarter of this year, Sri Lanka had external debt of $37.04 billion and domestic debt of $57.28 billion. Including guaranteed debt, the total reaches $100.18 billion, according to the country's Ministry of Finance, Economic Stabilization and National Policies.

Regarding Cambodia, by the end of the first quarter of 2024, the Kingdom's total public debt stood at $11.09 billion. Of this, 99.12%, or $11 billion, was public external debt, with 64% owed to bilateral development partners (DPs) and 36% to multilateral DPs. The remaining 0.88%, or $98 million, was public domestic debt, according to a report released by the Ministry of Economy and Finance in June.

“Cambodia’s public debt situation remains ‘sustainable’ and carries a ‘low risk’ of debt distress. All key debt indicators for 2024 are well below the thresholds, with the present value of public and publicly guaranteed external debt to GDP at 19%, compared to the 40% threshold,” it said.

The report noted that of Cambodia's $11.09 billion external debt, 36% is owed to China, 21% to the Asian Development Bank (ADB), 12% to the World Bank, 11% to Japan and 5% each to South Korea and France. The remainder consists of old debt and amounts owed to other multilateral lenders.

"It has been raised, in the case of Cambodia, that we need to be cautious. But I believe the Cambodian government has been very careful in how it uses the loans it receives from bilateral and multilateral institutions," Kheang said.

On the positive side, he noted that loans have the potential to drive economic development if used wisely and with proper planning.

"I believe there are two highly trusted institutions – the IMF and the World Bank – both of which have issued reports on Cambodia's debt level. It has been made clear that Cambodia’s debt is consistently sound and not in a state of distress," he added.

Kheang explained that the government has primarily used loans for infrastructure development, which has had positive effects. However, he stressed that this alone is not enough to fully utilise loans from other countries.

"What is also necessary is a comprehensive strategic plan that allows Cambodia to leverage its infrastructure to engage in global value chains," he said.

"I think it is a mistake to assume that China has the intention of promoting a 'debt trap' in other countries. It’s too simplistic to frame it that way, as the issue of debt traps is multidimensional. It has much to do with internal economic management and the investments of the recipient countries as well,” he added.