Cambodia 1433

IMF Country Report No.
14/33
CAMBODIA
February 2014
2013 ARTICLE IV CONSULTATION

Under Article IV of the IMFs Articles of Agreement, the IMF holds bilateral discussions with
members, usually every year. In the context of the 2013 Article IV consultation with Cambodia,
the following documents have been released and are included in this package:
The Staff Report for the 2013 Article IV consultation, prepared by a staff team of the
IMF, for the Executive Boards consideration on a lapse of time basis, following discussions
that ended on November 15, 2013, with the officials of Cambodia on economic developments
and policies. Based on information available at the time of these discussions, the staff report
was completed on January 9, 2014.
A Debt Sustainability Analysis prepared by the staffs of the IMF and the World Bank.
An Informational Annex prepared by the IMF.
A Press Release summarizing the views of the Executive Board.
The policy of publication of staff reports and other documents allows for the deletion of
market-sensitive information.
Copies of this report are available to the public from
International Monetary Fund Publication Services
700 19th Street, N.W. Washington, D.C. 20431
Telephone: (202) 623-7430 Telefax: (202) 623-7201
E-mail: publications@imf.org Internet: http://www.imf.org
International Monetary Fund

Washington, D.C.
2014 International Monetary Fund
CAMBODIA
STAFF REPORT FOR THE 2013 ARTICLE IV CONSULTATION
January 9, 2014
KEY ISSUES
Context. Growth remains strong driven by robust exports, tourism, and construction,
despite the recent floods and some slowdown during the 2013 national election. The
outlook is favorable with renewed reform momentum after the elections but slow
growth in Europe, the U.S. tapering, further extreme weather conditions, and sustained
labor market instability continue to pose downside risks, while rapid credit growth and
renewed pressure on deposits could undermine financial stability. The authorities have
continued to implement past staff recommendations, including mobilizing domestic
revenue, taking steps to strengthen monetary policy effectiveness, and implementing
some of the 2010 Financial Sector Assessment Program (FSAP) recommendations.
Maintaining the momentum of fiscal consolidation. The fiscal position has improved
driven by strong revenue performance. Fiscal consolidation should continue to rebuild
government depositsthe only fiscal buffersin view of the expected decline in grants,
including by making the planned wage increases in 2014 a part of a broader civil service
reform. Implementing the revenue mobilization strategy, better managing contingent
liabilities, and continuing to reform public financial management are critical to rebuild
and safeguard the fiscal space.
Containing macro financial risks and improving monetary policy effectiveness.
Inflation is expected to remain low, but rapid credit growth, increasing bank flows from
abroad, and the buoyancy of the real estate and construction sectors pose macrofinancial risks. In light of recent deposit withdrawals, strengthening liquidity risk
management is a priority. Containing credit growth including by expanding the base of
the reserve requirementsthe only monetary policy toolonce deposits stabilize, and
better monitoring of real estate developments are needed to contain risks. Developing
interbank and foreign exchange markets is necessary to enhance effectiveness of
monetary policy operations, help reduce dollarization and allow for greater exchange
rate flexibility. Further strengthening banking supervision and regulatory framework, and
establishing a crisis management framework are also needed to maintain the stability of
a rapidly changing financial sector.
Promoting economic diversification and inclusive growth. Continued improvement
in human capital, including through education and training, infrastructure, and business
climate, as well as further reductions in poverty and inequality, are essential for
sustainable and inclusive growth.
CAMBODIA
Approved By
John Nelmes (APD) and
Masato Miyazaki (SPR)
Discussions took place during November 415, 2013. The staff team
comprised Ms. Karasulu (head), Mr. Feridhanusetyawan, Ms.
Suphaphiphat (all APD), Ms. Wang (MCM), and Mr. Ahmed (Resident
Representative). Ms. Waqabaca (OED) also participated. The team met
with Minister of Economy and Finance Aun, National Bank of Cambodia
Governor Chea, other senior officials, representatives of private sector
and NGOs. The mission made a presentation to government officials
on regional outlook and Cambodias prospects. Ms. Lee (APD)
provided assistance preparing the report and Ms. Dao (APD)
provided research assistance with data and figures.
CONTENTS
OUTLOOK AND RISK _____________________________________________________________________________ 3
POLICY DISCUSSIONS ___________________________________________________________________________ 7
A. Maintaining the Momentum of Fiscal Consolidation ____________________________________________7
B. Improving Monetary Policy Effectiveness and Containing Macro Financial Risks ______________ 10
C. Promoting Competitiveness and Inclusive Growth ____________________________________________ 14
STAFF APPRAISAL ______________________________________________________________________________ 18
BOXES
1. Financial Sector Developments and Risks______________________________________________________ 12
2. Cambodias Export Competitiveness and the Implications of AEC 2015 _______________________ 16
3. Fiscal Policies for Human Capital Development _______________________________________________ 17
FIGURES
1. Strong Growth with Downside Risks _____________________________________________________________4
2. Stable External Position __________________________________________________________________________5
3. Maintaining the Momentum of Fiscal Consolidation ____________________________________________8
4. Rapid Credit Growth and New Challenges _____________________________________________________ 11
TABLES
1. Selected Economic Indicators, 201014 _______________________________________________________ 20
2. Medium-Term Macroeconomic Framework, 201018 _________________________________________ 21
3. Balance of Payments, 201018_________________________________________________________________ 22
4. General Government Operations, 201014 (GFSM 2001) ______________________________________ 23
5. General Government Operations, 201014 (GFSM 1986) ______________________________________ 24
6. Monetary Survey, 201014 ____________________________________________________________________ 25
7. Core Financial Soundness Indicators (FSIs), 200813 __________________________________________ 26
8. Key 2010 FSAP Recommendations of High Priority ____________________________________________ 27
9. Millennium Development Goals (MDG) Indicators _____________________________________________ 28
INTERNATIONAL MONETARY FUND
CAMBODIA
OUTLOOK AND RISK

1.
Political Context. The Cambodia Peoples Party (CPP) won the July election but the
opposition Cambodia National Rescue Party (CNRP) refused to join the National Assembly citing
voting irregularities and has been organizing mass demonstrations. In September, the Assembly has
approved a new five-year term for Prime Minister Hun Sen and his new Cabinet.
2.
Growth. Economic activity remains strong driven by robust exports, with garment exports
helped by preferential access to European Union (EU), and tourism with more diversified
destinations. (Figure 1, Table 1). Real estate and construction also expanded rapidly supported by
fast credit growth. Foreign direct investment (FDI) remained strong partly driven by factories
relocating from China and Vietnam. Despite these indicators, growth is expected to stay at 7 percent
in 2013 due to the sluggish global recovery, recent floods, and a slowdown in activity during the
election period. Growth is projected to pick up to 7 percent in 2014 in line with the global
recovery and to 7 percent in the medium term with improvements in infrastructure,
competitiveness, and investment climate (Table 2).
3.
Inflation and credit. Inflation is projected to stay around 34 percent during 201314
owing to projected stable commodity prices, once the impact of the recent floods on food prices
subsides. Private sector credit has been growing by about 30 percent (y/y) on average in the last
three years nearly doubling credit-to-GDP ratio to over 40 percent. While part of this is due to new
banks entering the market, which increased bank flows from abroad, heightened competition in the
system also contributed to rapid credit growth. In the process, lending rates and interest rate
spreads have declined.
4.
External stability. Despite robust exports and tourism, the current account deficit including
official transfers is expected to stay flat at around 8 percent of GDP in 2013 due to strong but
moderating imports, and remains fully financed by FDI and official loan flows (Figure 2). The deficit is
projected to decline to 5 percent of GDP over the medium term with improved competitiveness
and diversification of exports, and lower imports after the completion of large power projects
(Table 3). Gross official reserves stood at US$3.6 billion in November, about 3 months of
prospective imports. Although this reserve coverage appears to be adequate considering the longterm nature of Cambodias external debt, the high degree of dollarization (foreign currency deposits
are more than 1 times of gross official reserves) suggests that a higher level of reservesthan that
suggested by the reserve adequacy estimatesmay be warranted. Consistent with this stable
external position, the real effective exchange rate has remained broadly flat since 2008 and in line
with fundamentals, suggesting little evidence of a fundamental misalignment.1
1
The exchange rate regime is classified as other managed. The CGER estimates show that the exchange rate is
broadly in line with fundamentals, although being subject to large measurement errors, given weak data, rapid
structural change, and high degree of dollarization. The macroeconomic balance approach shows 3 percent
overvaluation while the equilibrium real exchange rate approach indicates 10 percent overvaluation. However, the
external sustainability approach suggests the exchange rate is broadly in line with the norm. The current account
norm is estimated at around 5 percent of GDP over the medium term, broadly in line with projections. The reserve
adequacy estimates range from 2 to 10 months of imports depending on the cost of holding reserves.
CAMBODIA
Figure 1. Cambodia: Strong Growth with Downside Risks

Exports are picking up owing to preferential access to E.U.
Economic growth remains strong supported by garment

exports, tourism, construction, trade, and agriculture.
Contribution to Export Growth
Contribution to Growth, 200413

(In percent)
25
Trade, real estates and finance
20
15
25
Proj.
Others
Construction
Hotels and transportation
Garments
Agriculture
20
15
Real GDP growth
10
10
-5
-5
2004
2005
2006
2007
2008
2009
2010
2011
2012
(In percent)
40
Others
30
20
20
10
10
0
-10
-10
-20
-20
2013
Tourist arrivals have been robust, particularly from the

region.
2007
2008
2009
2010
2011
2012
2013
while stable food and fuel prices kept inflation low.
Tourist Arrivals, 200813
Inflation, 200913
(Year-on-year percent change, 3-month moving average)

50
40
30
Garments
2006
Air arrivals
40
Proj.
Agriculture
50
Land and boat arrivals
40
30
30
20
20
10
10
0
(Year-on-year percent change)

20
20
15
15
10
10
0
-5
The recovery in the real estate and construction sector

continues
Mar-13
Sep-13
Fuel
Sep-12
Mar-12
Sep-11
Mar-11
Sep-10
Mar-10
Sep-09
Food
however, rapid credit growth, particularly to these sectors,

points to growing financial stability risks.
Real Estate Prices
Credit to Private Sector
(Year-on-year percent change, 3-month moving average)

200
200
Commercial real estate inflation

Residential real estate inflation
Construction materials imports
150
Headline
Mar-09
Sep-13
Jan-13
May-13
Sep-12
Jan-12
May-12
Sep-11
Jan-11
May-11
Sep-10
-20
Jan-10
-15
-20
May-10
-15
Sep-09
-30
Jan-09
-10
-30
May-09
-10
Sep-08
-20
Jan-08
-10
-20
May-08
-10
-5
150
(In percent)
60
50
100
50
50
50
Other Asian LICs, total (in percent of GDP) 1/

Cambodia, construction and real estate (y/y change)
40
100
60
Cambodia, total (in percent of GDP)
40
Cambodia, total (y/y change)
30
30
20
20
10
10
-10
Sep-13
Jan-13
May-13
Sep-12
May-12
Jan-12
Sep-11
Jan-11
May-11
Sep-10
Jan-10
May-10
Sep-09
May-09
Jan-09
1/ Average of Bangladesh, Lao P.D.R, Mongolia, Myanmar, Nepal, Papua New Guinea, and Timor-Leste.
Sources: Cambodian authorities; IMFs World Economic Outlook; and IMF staff estimates.
Sep-08
Jan-08
-10
May-08
Aug-13
Feb-13
Aug-12
Feb-12
Aug-11
Feb-11
Aug-10
Feb-10
Aug-09
-100
Feb-09
-100
Aug-08
-50
Feb-08
-50
CAMBODIA
Figure 2. Cambodia: Stable External Position

as large infrastructure projects are completed.
The current account deficit is fully funded by FDI, grants and

loans, and is projected to narrow over the medium term
Contribution to Import Growth, 201016
Current Account Deficit and Financing Flows, 201016

(In billions of U.S. dollars)
5
FDI
Loans (net)
Official transfers
4
Current account deficit 1/ (in percent of GDP, right axis)
18
15
12
(In percent)
50
50
Garment materials
Infrastructural projects
40
40
Petroleum products
Others
30
30
Export growth
9
2
20
20
10
10
2010
2011
2012
2013
2014
1/ Current account balance excluding official transfers.
2015
2016
-10
-10
2010
Cambodias share in the E.U. garment market continues to

increase...
2011
2012
2013
(In percent of GDP)

18
2011
16
15
5
Sep-13
Jun-13
Mar-13
Sep-12
Dec-12
Jun-12
6
4
1/ Share of Cambodia in Asian LICs' (Bangladesh, Cambodia, Sri Lanka, and

Vietnam) garment exports.
The real effective exchange rate has been broadly flat in the
post-2008 period.
Real Effective Exchange Rate, 200813
Official Reserves, 200913
Sep-13
Jun-13
Mar-13
Dec-12
20
Jun-12
Sep-12
40
Mar-12
90
Oct-13
Jun-13
Oct-12
Feb-13
Jun-12
Oct-11
Vietnam
80
Feb-12
Jun-11
Oct-10
Feb-11
Jun-10
Feb-10
Lao P.D.R.
Jun-09
Sri Lanka
Oct-09
Feb-09
Oct-08
Jun-08
Feb-08
Bangladesh
Sep-11
100
Cambodia
Dec-11
100
60
Jun-11
110
Mar-11
110
80
Dec-10
120
Jun-10
130
120
Gross official reserves (in months of imports, 3mma, right axis)
Sep-10
130
100
Dec-09
140
Official reserves (in percent of foreign currency deposits)
Mar-10
140
Gross official reserves (in billions of U.S. dollars, right axis)
Jun-09
150
120
Sep-09
(Index, 2005=100)
150
80
Official reserves continue to grow, covering about 3

months of imports.
Mar-09
Dec-11
Mar-12
Jun-11
Sep-11
Dec-10
Mar-11
Jun-10
Sep-10
14
Mar-10
10
10
Nepal
16
12
Myanmar
17
14
12
Vietnam
16
2012
14
Cambodia
18
US (right axis)
Lao P.D.R.
11
Bangladesh
19
Sri Lanka
12
90
2016
Foreign Direct Investment
(In percent, 12mma)
EU
2015
and FDI flows have been strong.
Garment Export Market Share, 201013 1/
10
2014
Sources: Cambodian authorities; Eurostat, IMFs World Economic Outlook database, and IMF staff estimates.
CAMBODIA
5.
Risks and spillovers. The outlook is subject to downside risks. Slow European growth could
affect garment exports, although the impact is likely to be limited as reallocating factories from the
region, such as China and Vietnam, brought their supply contracts to benefit from Cambodias lower
production costs and preferential access to the EU market. Cambodias direct exposure to
international capital markets remains limited, but U.S. tapering as well as slower growth in China
may have significant spillovers to
Cambodia: Risk Assessment Matrix (RAM)1/
Likelihood
Potential Impact
the region, and affect Cambodias
Protracted economic and financial volatility, especially for emerging markets
FDI and tourism. The potential
High
Medium
increase in dollar funding costs in Exit from unconventional monetary policy could The direct impact is limited because of Cambodia's small exposure to the
trigger capital outflows from emerging markets. international capital markets, and most capital inflows to Cambodia are
the post-tapering period could
The potential increase in dollar funding costs
FDI-related. However, should the volatility affect the countries in the
could lead to a stop in foreign bank financing.
region, tourism and FDI could be affected.
also lead to a stop in foreign
Global
oil price shock
bank financing from the region.
Low
Medium
In light of the fragile confidence
Continued geopolitical events in the Middle East With no fuel subsidy, any increase in world oil prices would create
could raise global fuel prices.
domestic inflationary pressure.
in the banking sector following
Protracted period of slower European growth
large deposit withdrawals during
High
Medium
Slow growth in Europe could reduce Cambodia's The impact would be mitigated by continued utilization of preferential
the election, renewed pressure on garment exports.
trade access to the E.U. market.
Labor market instability
deposits could undermine
Medium
High
financial stability. On the
Continued incidences of labor strikes could
Labor market instability could create a drag on exports and growth, and
disrupt garment production.
if prolonged, could weaken Cambodia's competitiveness.
domestic front, further extreme
Extreme weather
weather conditions could affect
Medium
High
the rural poor especially hard,
Extreme weather conditions (drought or flood)
Extreme weather shocks would adversely affect growth and have serious
could lower agricultural production.
welfare implications on farmers and rural population.
and dent exports and tourism,
Fiscal risks
while prolonged labor disputes
Medium
Medium
Slow progress in fiscal refroms could hamper
Limited progress in mobilizing revenue and pressures to increase
could disrupt garment
fiscal consolidation.
spending would hamper the efforts to rebuild fiscal space and jeopardize
fiscal sustainability.
production. On the positive side,
Financial sector risk
improving power and rural
Medium
High
Continued rapid credit growth and proliferation Excessive risk taking by banks to compete for market share amid a
infrastructure as well as more
of real estate financing could jeopardize
growing role of foreign financing could result in a deterioration of asset
diversified FDI and a renewed
macroeconomic and financial stability.
quality, increase in financial sector vulnerabilities and liquidity risks, and
a decline in confidence during a downturn. High degree of dollarization
reform momentum after the
limits the lender-of-last resort capacity of the central bank.
elections could provide a boost
1/ It shows events that could materially alter the baseline path. The RAM reflects staff's views on the source of risks and overall level of
concerns as of the time of discussions with the authorities.
to exports and growth.
6.
Policy response and the authorities views. Should downside risks materialize, the policy
space to support growth is limited as fiscal consolidation has been slower than expected since 2010.
In case of adverse shocks, this limited room for additional spending should be allocated to high
impact expenditures on development priorities in education, health, and infrastructure. At the same
time, high dollarization limits effectiveness of monetary policy and the declining reserve coverage in
terms of foreign currency deposits highlights the limitations on the National Bank of Cambodias
(NBC) lender of last resort capacity to respond to shocks. This limited policy space underscores the
need for vigilance in containing financial sector risks before they materialize. However, should risks
to the financial sector materialize NBC should use its available lender of last resort capacity, while
expediting the implementation of the crisis management framework, including by enhancing bank
resolution powers. The authorities broadly agreed with staff views on the exchange rate assessment,
outlook, risks and the limited policy space. However, they remained cautiously optimistic that the
floods impact would be less than projected and expected GDP growth to exceed 7 percent in 2013.
CAMBODIA
They also viewed external factors posing less risk to growth than domestic factors, such as
prolonged labor disputes.
POLICY DISCUSSIONS
A. Maintaining the Momentum of Fiscal Consolidation
7.
Context. Buoyant domestic demand and revenue collection efforts improved the fiscal
position (Figure 3, Tables 45) making the 2013 budget revenue targets reachable. Domesticallyfunded spending is also expected to remain within the budget envelope as the increase in civil
service salaries in September 2013 (the lowest salaries were increased up to the minimum wage of
US$80 per month) had a limited fiscal impact (0.1 percent of GDP). Meanwhile, delays in donors
reporting of foreign-funded spending continue to hamper the timely monitoring of capital
expenditure. The fiscal deficit, excluding grants, in 2013 is expected to narrow further by about
percentage points (ppt) of GDP. Despite this progress, the stock of government deposits in terms
of GDP is projected to decline slightly to around 4 percent.
8.
The 2014 Budget. The budget envisages an additional 25 percent increase in wage bill,
particularly for low salary bands, to promote human resource development in public administration
and improve public services in line with the authorities priorities in the Rectangular Strategy Phase
Three (RSIII). To finance the increasing wage bill, the targets for tax and nontax revenues are raised
( ppt of GDP higher than the 2013 budget target) and other spending kept broadly constant in
terms of GDP, while creating some savings to replenish government deposits.
Plans to further reduce the wage gap should be part of a broader civil service reform to avoid
jeopardizing fiscal consolidation. The large fiscal cost ( percent of GDP) would increase
Cambodias wage bill to 5 percent of GDP in 2014, beyond those of the peers as a share of
domestic revenue and current expenditure. Therefore, further salary increases should target
containing the wage bill to around 5 percent of GDP over the medium term by expediting civil
service reforms to improve productivity of the civil service. The authorities acknowledged
these challenges and have established two working groups for wage and civil service reforms
to contain the wage bill while improving the capacity and accountability of the civil servants.
Targeting an increase in government deposits despite spending pressures is well placed, but
there is room to increase the envisaged savings (Riel 80 billion) further. Since government
savings provide the only fiscal buffer against adverse shocks, striving to maintain the stock of
government deposits at least broadly constant in terms of GDP remains appropriate. This
would require additional savings of about Riel 170 billion (less than ppt of GDP) which
could be achieved by stepping up revenue collection efforts to exceed the target and
improving spending efficiency. The authorities shared the staffs views and reaffirmed their
commitment to rebuilding fiscal buffers. They concurred there is room for additional revenue,
for example by increasing excise taxes and expanding their base, rationalizing vehicle tax,
collecting more tax debt, expanding the tax net, and strengthening customs administration,
including by combating smuggling.
CAMBODIA
Figure 3. Cambodia: Maintaining the Momentum of Fiscal Consolidation

Revenue collection has been strong driven by buoyant
economic activity and improvements in tax administration.
The fiscal position has continued to improve and fiscal

consolidation is broadly on track.
Fiscal Balance
Fiscal Revenue
(In percent of GDP)

40
30
(In percent of GDP)
Capital exp. (dom. funded)
Capital exp. (ext. funded)
Current expenditure
Grants
40
Proj.
30
Domestic revenue
20
20
Net Lending/Borrowing
10
10
20
5
0
-30
-5
2010
2011
2012
2013
2010
2011
2012
2013
(In percent of GDP)
Net acquisition of non-financial

assets
Other expenses
25
2009
Tax Collection in Asian LICs
(In percent of GDP)
30
2008
However, Cambodias tax collection remains low by regional

standards, suggesting room for further improvement.
Goverment Spending
35
-5
2007
Meanwhile, government spending has been prudent in line

with the budget.
20
5
0
2009
Good and services tax
Income and profit tax
10
-20
2008
International trade tax
10
-20
2007
Other domestic revenues
15
-10
2006
Grants
15
-10
-30
25
25
35
35
30
30
25
Purchase of goods and services
25
35
Vietnam
Cambodia
Myanmar
Other Asian LICs 1/
Lao P.D.R.
30
25
20
20
15
15
15
10
10
10
10
20
20
15
0
Sources: Cambodian authorities; and IMF staff estimates.
1/ Average of Bangladesh, Bhutan, Mongolia, and Nepal.
0
2007
2008
2009
2010
2011
2012
2013
Further revenue mobilization is critical to sustain fiscal

consolidation and rebuild fiscal buffers over the medium term.
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
External public debt remains low despite large disbursement

of loans in recent years.
External Public Debt
Medium-term Fiscal Outlook

30
(In percent of GDP)

180
25
160
20
140
15
15
120
10
10
100
100
80
80
60
60
40
40
20
20
(In percent of GDP)

30
Capital exp. (dom. funded)
Current expenditure
25
Domestic revenue
20
Net Lending/Borrowing
Capital exp. (ext. funded)

Grants
-5
-5
-10
-10
-15
-15
-20
-20
-25
-25
2013
2014
2015
2016
2017
2018
Cambodia
Lao P.D.R.
Vietnam
Myanmar
Other Asian LICs 1/
180
160
140
120
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
1/ Average of Bangladesh, Mongolia, and Nepal
Sources: Cambodian authorities; IMFs Government Finance Statistics and World Economic Outlook; Globalintegrity.com; and IMF staff estimates.
CAMBODIA
9.
Revenue Mobilization Strategy (RMS). The governments commitment to continue raising
domestic revenue by ppt of GDP annually over the medium term would help safeguard fiscal
sustainability. With overall current spending kept broadly constant in terms of GDP, the fiscal deficit
(excluding grants) could be reduced by about 3 ppt of GDP from 2013 to 2018, while providing
resources for currently donor supported development spending, including in health and education,
in light of the expected decline in grants. In the process government deposits can be replenished to
about 5 percent of GDP by 2018, while limiting public external debt to less than 30 percent of GDP
to strengthen Cambodias ability to absorb future shocks.2 In this regard, it is essential to adopt the
RMS in 2014, which is based on a three-pronged approach: (i) improving revenue administration,
(ii) implementing fair and efficient tax policies, and (iii) strengthening governance. The authorities
agreed with staffs recommendations and indicated their near term priorities to reform excise taxes
and the VAT, expand the base of the formal (nonestimated) tax regime, and rationalize exemptions
and tax holidays. In this context, the plans to set up taxpayer services, modernize IT systems,
strengthen capacity of tax officers, and improve governance could start a virtuous cycle. In the
medium term, the introduction of income tax, expansion of property tax base, and better
administration of nontax revenues would further improve fiscal performance.
10.
Safeguarding fiscal space. Careful management of contingent liabilities related to public
private partnerships (PPP) remains critical to contain fiscal risks. The authorities have made progress
in collecting more information about the PPP projects with technical assistance (TA) from the World
Bank. The latest estimate shows that the size of investment projects was around 25 percent of GDP
in 2012, lower than previously estimated. The work on estimating the related contingent liabilities is
still ongoing. Meanwhile, the Ministry of Economy and Finance (MEF) has established an investment
department as a central PPP-monitoring unit and a debt management department to manage
contingent liabilities and the associated risks. The authorities concurred that these risks need to be
better managed and indicated their plans to continue strengthening the institutional capacity,
including by seeking further TA. They also noted plans to adopt a ceiling on PPP guarantees and list
all contingent liabilities and guarantees in annual budget laws to help improve fiscal transparency.
11.
Public Finance Management (PFM). The adoption of a new chart of accounts with
improved budget classifications in 2015 should pave the way for the implementation of the Financial
Management Information Systems (FMIS) that is being prepared. In the meantime, expediting the
development of an effective internal audit mechanism remains important for successful
implementation of FMIS, planned roll out of program budgeting and the relocation of decision
making and accountability to ten line ministries. In addition, strengthening donor coordination for
timely reporting of donor support would help improve planning and monitoring of capital spending.
The authorities broadly agreed with these priorities, requested continued TA support for successful
implementation of PFM reforms and noted plans to fully implement program budgeting starting
with the education sector to improve spending efficiency.
The Debt Sustainability Analysis confirms Cambodias low risk of debt distress.
CAMBODIA
12.
Arrears. The authorities noted that they have been pursuing discussions with the Russian
Federation and the U.S. to resolve Cambodias debt arrears and would prefer to use most of the
debt forgiveness toward development goals. However, an agreement has not been reached.
B. Improving Monetary Policy Effectiveness and Containing Macro

Financial Risks
13.
Context. The only monetary policy tool is the reserve requirements, which have been raised
in September 2012 by ppt to 12 percent on foreign currency deposits. However, bank funding
from abroad is not subject to any prudential limits, escapes monetary control, and could stop with
tapering in the U.S., leading to volatile liquidity and credit conditions. Large deposit withdrawals
during the election (10 percent of total deposits), which highlight the fragile confidence in the
banking sector, reduced banks excess reserves substantially (Table 6), but these deposits started to
return to the banking system in October. Furthermore, the high degree of dollarization and the
absence of an interbank market, which contribute to high precautionary excess reserves, limit the
NBCs control over monetary conditions and its lender-of-last resort capacity. Although recent
financial soundness indicators (Table 7) do not reveal any immediate concern, Cambodias banking
sector is facing old and new risks from a crowded banking system, rapid credit growth, increasing
foreign bank funding, greater real estate exposure, and stretched supervisory capacity (Figure 4 and
Box 1). Therefore, discussions focused on containing these macro financial risks and developing the
interbank and the foreign exchange markets to improve monetary control. Continuing with the
implementation of the recommendations of the 2010 FSAP (Table 8) and ongoing TAs remains
essential, as well as strengthening the Anti Money Laundering/Combating the Financing of
Terrorism (AML/CFT) regime to safeguard financial stability.
14.
Multi-pronged approach. Although low inflation and below potential growth do not point
to an immediate need to tighten monetary policyvia higher reserve requirementsespecially in
light of the continued fiscal consolidation and recent deposit withdrawals, steps on multiple fronts
are needed to contain macro financial risks and safeguard financial stability.
More targeted supervision of liquidity risks would improve the resilience of the system against
potential deposit withdrawals or sudden reversal of foreign funding, especially in the absence
of a formal interbank market. The broad definition of the liquid asset ratio (LAR) overstates
true liquidity conditions, as the recent experience highlighted, and calls for better monitoring
of truly useable liquidity buffers.3 This should be complemented with contingency plans by
banks and the NBC to address potential liquidity pressures, including by expediting the
planned revision of standing facilities4 and improving liquidity forecasting in line with recent
The LAR is defined as the ratio of liquid assets to weighted deposits, where the liquid assets include cash and gold,
net deposits with banks and NBC, including required and excess reserves, and net loans within one month of
maturity. Some of these assets are not readily available on call.
With TA support from the World Bank, the NBC is planning to re-launch the existing overdraft facility as a standing
facility to meet short term liquidity requirements.
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CAMBODIA
Figure 4. Cambodia: Rapid Credit Growth and New Challenges

Credit growth has been persistently high for the past three
years
partly driven by rapid expansion of new entrants which

fund themselves from abroad.
Contribution to Credit Growth
Releative Shift of Market Share: New Banks
(In percent)
60
60
Agriculture
Industry
50
Construction, real estate and utilities
Hotel and restaurants
Whole sale, retail and transportation
Personal lending
40
Personal mortgage
Other services
50
30
20
20
10
10
Jul-13
Sep-13
May-13
Jan-13
Mar-13
Nov-12
Jul-12
Sep-12
May-12
Jan-12
Mar-12
Nov-11
Jul-11
Sep-11
May-11
Jan-11
Mar-11
Nov-10
Jul-10
-10
Sep-10
-10
Mar-10
100
Market Share in 2011

Share of new loans provided in 2012
80
80
40
30
May-10
(In percent)
100
60
60
40
40
20
20
0
0
Top-5
In the process the loan-to-deposit ratio has continued to

increase
Top-10
New Foreign Banks
..and excess reserves were reduced.

Credit to the Economy and Excess Reserves, 200813
Deposit and Credit Growth, 200813
(In percent)
50
50
50
40
40
80
40
30
30
60
30
40
20
20
20
20
10
10
10
25
Gap with 30 percent credit growth
80
96
60
94
Foreign currency deposits to total deposits
40
92
Claims on private sector in foreign currency to total claims on

private sector.
International reserves to foreign currency deposits (RHS)
20
90
Sep-13
Jan-13
May-13
Sep-12
May-12
Jan-12
Sep-11
May-11
Jan-11
Sep-10
Jan-10
May-10
Sep-09
May-09
Jan-09
Sep-08
Jul-15
-5
Jul-14
-5
Jul-13
Jul-12
Jul-11
Jul-10
10
Jul-09
10
Jul-08
98
Jan-08
15
Jul-07
100
May-08
Gap with 20 percent credit growth
Jul-06
100
20
15
Jul-05
Sep-10
(In percent)
30
Credit-to-GDP gap (deviation from past trend)
Jul-04
Mar-10
Dollarization, 200813
(In percent)
30
20
Sep-09
Mar-09
Meanwhile, the degree of financial dollarization remains

persistently high.
Cambodia: Credit Gap
25
-10
Sep-13
Sep-13
Jun-13
Mar-13
Dec-12
Jun-12
Sep-12
Dec-11
Mar-12
Sep-11
Jun-11
Mar-11
Sep-10
Dec-10
Jun-10
Dec-09
Mar-10
Sep-09
Jun-09
-10
If the current pace of credit growth continues, credit-to-GDP

gap would rapidly widen, surpassing the 2008 boom.
Excess reserves to deposit

Credit growth (3MMA, annualized)
-10
Mar-09
-20
Mar-13
100
60
Sep-12
120
Mar-12
Loan-to-deposit ratio (in percent)

Deposit growth (y/y, right axis)
Credit growth (y/y, right axis)
Sep-11
70
Mar-11
140
Sources: Cambodian authorities; and IMF staff estimates.
11
CAMBODIA
Box1. Financial Sector Developments and Risks

Cambodia has witnessed a fast paced financial deepening in recent years. Credit-to-GDP ratio has nearly
doubled in the last three years, surpassing peers and diverging from past trends of sustainable financial
deepening. In addition, intensifying competition for market share has increased banks risk appetite, especially for
smaller and mid-sized banks which expanded faster from a relatively small base, potentially deteriorating quality
of loan portfolios. Despite fast credit growth, financial access remains limited to about 12 percent of the
population suggesting more exposure to a relatively small group of creditors, intensifying concentration risks.
Entry of new banks has accelerated credit expansion. Foreign banks that started operations since 2011
contributed to more than one-third of total new lending in 2012, often with funding from abroad, which tripled in
2012 and unlike domestic liabilities is not subject to reserve requirements, the only monetary policy tool.
Rapid credit growth amid a shifting funding structure compounds potential liquidity risks. Domestic deposit
growth has not kept pace with credit growth. As a result, excess reserves as a share of deposits have gradually
declined from their peak of 30 percent (mid-2010) to around 10 percent in recent months, notwithstanding the dip
due to recent deposit withdrawals. In the process, the loan-to-deposit (LTD) ratio trended upwards to over
100 percent, a level considered high even by emerging market standards.
Fast expansion of the real estate sector point to emerging financial stability risks. Although the lack of
reliable housing price data constraints a complete analysis, land prices have increased by over 10 percent (yoy)
and loans to construction and real estate grew by over 44 percent (yoy) in September; imports of construction
materials surged and construction approvals for residential units alone quadrupled in 2012, and loan-to-value
ratios (LTV) are showing an upward drift from 6070.
Proliferation of real estate financing from the shadow banking system adds to overall risks. Some real estate
developers are reportedly offering real estate loans at competitive interest rates, effectively competing with banks.
However, their funding sources remain largely obscure and beyond regulatory and supervisory oversight.
Although the younger demographics and a rising middle class would support some demand growth, supply lags
and exuberance often lead to the overshooting of construction booms, as experienced by many economies.
MCM TA. In this context, the recent swap agreement with the Bank of International Settlements
would provide more room (US$200 million) to respond to liquidity shocks.
Fully enforcing the reserve requirements to include bank funding from abroad in the reserve
base would help contain credit growth and improve monetary control. This should be
accompanied by close monitoring of maturity mismatches for early signs of increasing rollover risks. Should expansion of required reserve base prove insufficient to contain credit
growth, consideration should be given to introducing LTD ratio limits as well as higher risk
provisioning for new loans, especially for high risk sectors.
Better monitoring of real estate sector developments is needed, including by strengthening

reporting requirements for all construction activity and real estate sales. Should recent price
and activity trends intensify, the NBC could introduce LTV limits, especially in fast growing
segments of the real estate market. The proliferation of shadow banking activities by real
estate developers calls for strengthening their regulation, including for licensing and reporting
of funding sources.
The authorities broadly agreed with staffs assessment and indicated their plans to revisit the
definition of LAR. They also noted that large excess reserves reflected precautionary motives by
banks and proved useful during the deposit withdrawals. However, they preferred continued
monitoring of foreign bank flows and credit growth before taking further measures, including
12
CAMBODIA
enforcing reserve requirements on foreign funding and requested TA in macroprudential measures,

such as LTDs and LTVs. They shared concerns regarding weaknesses in monitoring real estate
developments, which requires coordination among several agencies (e.g. MEF and Ministry of Land)
to support NBCs efforts to improve real estate data collection.
15.
Interbank and foreign exchange markets. The introduction of negotiable certificates of
deposit (NCDs) by the NBC both in U.S. dollar (USD) and Khmer Riel (KHR) is a first step toward
developing the interbank market and laying the groundwork for market-based monetary policy
operations.5 Subscriptions have been limited so far, partly due to deposit withdrawals and reportedly
unattractive pricing. Further consultations with the banking community would be needed to improve
their attractiveness, including by differentiating their pricing from that of NBCs deposit facility.
Although exchange rate stability has been a hallmark for sustaining demand for domestic currency,
going forward, the development of money and foreign exchange markets should allow for more
exchange rate flexibility. In this regard, encouraging state-owned enterprises to source their foreign
currency from commercial banks instead of the NBC would also help catalyze market development.
Finally, the NBC is preparing to conduct a dollarization survey to help formulate policies to promote
the use of local currency. The authorities noted that the NCDs would require time to be widely
adopted by the banking sector. They also emphasized the importance of exchange rate stability for
maintaining the demand for domestic currency, and considered establishment of interbank and
foreign exchange markets as a prerequisite to more effectively address dollarization in the medium
term.
16.
Risk-based supervision. The NBCs on-site supervision is increasingly relying on risk-based
targeted inspections rather than full-scale examinations.6 In view of the limited supervisory
resources, focusing on emerging risks and strengthening internal training would improve
supervisory effectiveness. In this regard, stepping up efforts in monitoring LTV ratios, underwriting
and valuation standards for real estate and construction loans would be important, as well as
concentration, related party and credit risks, to preempt excessive risk taking. Improving the quality
of off-site supervision by enhancing the analytical skills and improving data quality will also be vital
in strengthening banking supervision. The emergence of nonresident loans and deposits also
warrants close monitoring, including for AML/CFT purposes. In March 2013, the authorities adopted
the AML/CFT national strategy, which sets out a 5-year action plan to address the deficiencies
identified by the Financial Action Task Force (FATF).
17.
Supervisory capacity. Despite continued improvement through recruitment, training, and
TA, rapid expansion of the banking system, including through three new bank licenses in 2012, and
the transition to risk-based supervision has continued to put additional burden on the already
stretched supervisory capacity. In this context, the 2010 FSAP recommendation of imposing
moratorium on new bank licensing remains appropriate. The authorities indicated that
implementing a formal moratorium may signal a closed-door policy to investors, but they
5
The maturities range from 2 weeks to one year with interest rates equal to those on NBCs deposit facilities.
By October in 2013, the NBC has completed on-site inspection of 13 banks including top five banks; five are rated
as satisfactory, and eight are fair according to a rating scale of good, satisfactory, fair, unsatisfactory and poor.
13
CAMBODIA
recognized the capacity constraints and reiterated their commitment to maintain a tight stance on
new bank licensing and encourage potential applicants to merge with existing banks.
18.
Crisis prevention and management. Strengthening the financial crisis management
framework is critical in managing systemic risks and minimizing potential fiscal costs. In February,
the NBC, the MEF, and the Securities Exchange Commission of Cambodia (SECC) signed a
Memorandum of Understanding (MoU) on establishing a policy level Working Group (WG), which
also led to the formation of a technical Core Team (CT). Going forward a two track and time-bound
approach should target strengthening coordination for crisis prevention and signing of a second
MoU on crisis resolution: while the CT explores the types of risk-appropriate joint vulnerability
exercises and the information sharing needs, the WG should focus on identifying and clarifying the
responsibilities of respective agencies in preventing and resolving crisis. In return, these
deliberations should inform the role of respective agencies in the joint vulnerability exercises,
identify further areas for analysis, and help develop contingency plans. In parallel, the NBC should
expedite improvements to the Prompt Corrective Action framework in line with FSAP
recommendations. The authorities agreed with the urgent need to establish a crisis management
framework and reiterated their commitment to move forward with the process. As a first step, with
TA support from the World Bank, they plan to discuss a draft memorandum on crisis management
among the agencies.
C. Promoting Competitiveness and Inclusive Growth

19.
Context. Cambodia has made good progress in achieving the Millennium Development
Goals (Table 9). Rapid growth in the past decade contributed to a substantial decline in poverty from
about 50 percent in 2007 to around 21 percent in 2011. However, a large segment of the population
continues to live near the poverty line and growth continues to rely on a narrow economic base,
contributing to economic vulnerability. Efforts to increase value-added and diversify the economy
remain constrained by low education levels and skill shortages, as well as infrastructure bottlenecks
and weaknesses in business climate. On the other hand, the relatively open trade and investment
regime and proximity to other ASEAN countries point to a high potential in terms of trade and
inward investment. Early signs of manufacturing diversification are evident in recent FDI trends,
which is likely to be reinforced with the implementation of Asian Economic Community in 2015 and
supported by increased electricity supply and multinational firms efforts to diversify their supply
chains. Against this background, the authorities noted that promoting competitiveness and
improving human capital as well as further reducing poverty and inequality remain the top priorities
in their recently adopted RS III to sustain inclusive growth.7
20.
Promoting competitiveness. Cambodias competitiveness has improved over time, but it
remains concentrated around low value-added garment and agricultural products due to relatively
7
The RS III, which serves as a framework for the 201418 national development plan, emphasizes four priorities:
(1) developing human resources to ensure competitiveness; (2) developing physical infrastructure and improving
trade facilitation; (3) promoting agriculture, including crop, livestock, fisheries, and agro-industry, and
(4) strengthening governance and capacity of public institutions.
14
CAMBODIA
low wages and productivity (Box 2). Going forward, this alone would not be sufficient to sustain
growth. In order to accelerate diversification and improve competitiveness, continued improvements
in human capital, including through education and training, infrastructure, and the business climate
are needed. In this regard, the reform agenda by the Ministry of Commerce to reduce the regulatory
burden for businesses while improving governance and accountability of government agencies
(including by strengthening the anti-corruption and AML frameworks) would ease constraints on
doing business. Increasing agricultural productivity and further improving rural infrastructure will
also help increase competitiveness in agriculture.
21.
Improving human capital. Cambodia has made substantial progress in education access,
but there is room to improve education outcomes, which is essential to move up the value-added
chain and make growth more inclusive (Box 3). The increase in education spending in the 2014
budget, partly reflecting higher teacher salaries will help contribute to human capital development.
Nonetheless, Cambodias public spending on education is low relative to peers, but the room to
increase spending by relying solely on budgetary resources is limited. Therefore, the near term
priority should be improving efficiency and reallocating spending within the budget envelope. A
new initiative, such as establishing a national training fund, could be considered over the medium
term, but this would require successful implementation of public finance reforms, particularly by
improving tax administration and spending efficiency.
22.
Data statistics. Improving the quality and timeliness of economic and financial data would
facilitate better formulation of macroeconomic policies and informed decisions by the private sector.
In view of the increasing foreign funding of the private sector, including through the banking
system, the authorities should start collecting data on private sector debt to monitor and address
the associated risks.
15
CAMBODIA
Box 2. Cambodias Export Competitiveness and the Implications of AEC 2015

Cambodias export-led growth model presents an opportunity to benefit from the ASEAN Economic
Community (AEC) if exports can be diversified. Exports contributed on average more than 50 percent to
Cambodias GDP growth over the past decade and are expected to remain the key driver of growth going
forward. While the United States and the European Union (EU) are the primary destinations for Cambodias
main export item, garments, total exports to ASEAN have also grown substantially over the last decade
accounting for 12 percent of the countrys total exports at end-2012. Rubber and woods are the main export
products to ASEAN, and represent and about 3 percent of the regions total imports of these
commodities, respectively. Although, the elimination of tariffs and nontariff barriers by 2015 could help
enlarge Cambodias markets for these products initially, the existing trade structure points to the need to
diversify exports for further trade expansion.
Cambodias comparative advantage is concentrated in a few types of products, most of which have
low value-added. Compared to the rest of ASEAN, Cambodias exports is the second least diversified, only
after Brunei. Based on revealed comparative advantage indices, Cambodia has strong comparative
advantage in world markets in ready-to-wear garments, wood, and footwear, mainly due to its relatively low
wages. These products constitute only a small share of ASEANs imports limiting the benefits from market
expansion, while recently increasing market share in vegetables and rubbers point to better prospects in
regional markets. The product space analysis also indicates that Cambodias opportunity to expand its
currently competitive export products into new clusters remains a challenge as garments and vegetables do
not have close connectivity with other higher income-potential products.
However, AEC could become a catalyst in
diversifying Cambodias production and moving
toward a higher income potential export base.
Cambodias central location within ASEAN could
help attract FDI in more diversified manufacturing to
have tariff-free access to regional markets as well as
to Everything but Arms initiative of the EU, while
benefiting from low wage advantage. The ongoing
diversification of regional supply chains could also
help increase FDI in search for tariff-free access to a
larger ASEAN market. Early signs of this trend have
already emerged with rapid growth of FDI in
nongarment sectors.
Contribution to FDI growth by Sector, 2011-12*

(In percent)
120
120
100
80
60
100
Banks
Non-garments
80
Garment
60
40
40
20
20
0
-20
-20
-40
-40
2011
2012
* The data is FDI flows by approval and excludes large power plant projects.
Sources: Data provided by the authorities.
Addressing infrastructure bottlenecks and labor skill gaps while improving the business climate are
essential to realize the potential benefits from AEC 2015. While macroeconomic and financial stability
remain essential to reap the benefits from larger regional markets, leveraging Cambodias central location
within ASEAN would require improving transportation infrastructure, power supply and trade facilitation.
Although the free movement of skilled labor may in the short term address skill gaps often cited as an
impediment for industrial diversification it also poses risks of losing already scarce skilled labor to more
attractive labor markets in the region, highlighting the need for continuous improvements in human capital
through education and training. Improving the business climate, including by reducing impediments for
doing business would also help make Cambodia a more attractive destination for investment to benefit from
market expansion.
16
CAMBODIA
Box 3. Cambodia: Fiscal Policies for Human Capital Development

Cambodia has made substantial progress in
improving education, but there is scope to catch
up with peers. Despite increasing school enrollment
and literacy rates and declining pupil teacher ratios in
the last decade, further efforts are needed to improve
education outcomes. Business surveys indicate that
skill shortages and mismatches continue to hamper
industrial upgrading, private investment, and
economic diversification. Cambodias public spending
on education, including grants, has been broadly
constant at about 2 of GDP for the past five years,
lower than in peers.
Raising labor productivity and providing adequate
resources for education within a limited fiscal
space pose challenges. Cambodia has relied on low
skilled manufacturing and services to support its
growth. As the country develops toward an emerging
market economy, it will have to rely on more
sophisticated production processes and high-skilled
labor force to sustain its rapid growth and compete in
global markets. However, the room to increase
education spending by relying solely on budgetary
resources is limited. Over the medium term the
challenge is to balance the need to rebuild fiscal
buffers to maintain fiscal sustainability, while
providing room for more spending on education and
maintaining adequate capital spending as grants
decline.
Selected Asia: Education Indicators

120
100
80
60
40
20
0
Cambodia Lao PDR Myanmar Vietnam
Pupil teacher ratio (percent)
Other
Other
ASEAN Asian LICs
(average) (average)
Literacy rate 2010 (in percent of people ages 1524)

Secondary enrollment rate 201011 (in percent)
Source: World Bank's World Development Indicators.
Public Spending on Education, 200911

25
20
In percent of total expenditure
In percent of GDP
15
10
5
0
Cambodia Lao PDR Myanmar Vietnam
Other
Other
ASEAN Asian LICs
(average) (average)
Source: World Bank's World Development Indicators.
Given the budgetary constraints, the near-term priority would be reallocating resources within the budget
envelope, improving spending efficiency, and securing more donor support for education. For example, the
World Bank public expenditure review (2011) indicates that improving efficiency in health spending could generate
some savings that can be used for other priority spending. Improving education quality without relying on
additional resources, such as targeted programs to reduce dropout rates, strengthening program budgeting for
education, and providing schools with greater autonomy to manage spending while holding them accountable for
outcomes, would play an important role. Cambodias spending efficiency for primary school enrollment is broadly
comparable to its peers, but the scores for secondary school enrollment are lower, suggesting that any efforts to
1
raise spending efficiency in secondary education could improve education outcomes as well.
Over the medium term, new initiatives such as establishing a national training fund (NTF) could be
considered to provide additional resources for training and skill development. NTFs in many countries are
financed by enterprises, such as through taxes earmarked for training, although some may also be financed by
public subsidies or donors. The earmarked-taxes are commonly based on payroll, and may include incentive
schemes such as cost reimbursement, grants, and tax exemption or rebate, if firms provide training. In this context,
the NTF requires sufficient administrative capacity and sound tax administration. In addition, the NTF is not a
substitute for formal education and should not crowd out resources allocated to formal education or generate
disincentives to formal education.
Successful implementation of public finance reform program would play a critical role in supporting
human capital development. This would include enhancing revenue administration to provide more fiscal space,
reallocating spending within budget envelope to human capital development, improving spending efficiency and
effectiveness, and preparing the capacity to establish a training fund over the medium term.
_______________
1/ Herrera and Pang (2005) World Bank Policy Research Working Paper 3645.
17
CAMBODIA
STAFF APPRAISAL
23.
Economic setting. Economic activity remains strong driven by robust exports, tourism, and
construction despite recent floods and some slowdown during the election. Growth is projected to
pick up to 7 percent in 2014 and reach 7 percent over the medium term along with global
recovery, improvements in infrastructure, competitiveness, and investment climate. Inflation is
expected to remain low in 201314 due to stable food and fuel prices. The external position is stable
notwithstanding a declining reserve coverage of foreign currency deposits, and the real effective
exchange rate appears to be in line with fundamentals.
24.
Risks and policy response. The U.S. tapering and slow European growth could expose
Cambodias favorable outlook to downside risks. On the domestic side, rapid credit growth and
emerging risks in a fast changing financial landscape could undermine financial stability; extreme
weather conditions could affect agriculture and growth, and labor market instability could disrupt
garment production and exports. Should these downside risks materialize, low fiscal buffers would
require any additional expenditure to be allocated to high-impact development spending.
25.
Past recommendations. The progress made by the authorities in implementing past Article
IV recommendations is welcome. They have improved revenue collection, formulated a revenue
mobilization strategy, and strengthened public financial management, including improving the
monitoring of contingent liabilities. They have also introduced NCDs to help develop the interbank
market, improved financial supervisory capacity, and established an initial MoU to establish a financial
crisis management framework. Continuous progress in many of these areas remains necessary and is
reflected in the priorities of this Article IV consultation.
26.
Fiscal policy. The strong fiscal performance has continued, driven by substantial
improvement in revenue collection and prudent spending. Fiscal consolidation should continue to
rebuild government depositsthe only fiscal buffersin view of the expected decline in grants, to
maintain long-term fiscal and debt sustainability, including by making the planned wage increases in
2014 a part of a broader civil service reform. Successful implementation of revenue mobilization
strategy and careful management of contingent liabilities are needed to rebuild and safeguard the
fiscal space. Continuing with public financial management reforms remains important to improve
fiscal accountability and transparency.
27.
Macro financial policies. Rapid credit growth, increasing foreign bank financing and the
buoyancy of the real estate and construction sectors pose substantial macro financial risks especially
in light of high dollarization, which limits monetary policy effectiveness and lender-of-last resort
capacity. Steps on multiple fronts are required to contain credit growth and safeguard financial
stability. Strengthening liquidity supervision and redefining the LAR to better capture banks true
liquidity conditions will improve their resilience to shocks. Fully enforcing the reserve requirements
to include foreign funds in the reserve base would help contain credit growth. Should this fail to
slow credit growth macro prudential measures such as LTVs and LTDs could be considered. Better
monitoring of real estate developments, by collecting more data including on developer financing, is
also needed to contain risks. Finally, the introduction of NCDs is a welcome first step toward market-
18
CAMBODIA
based monetary operations. Going forward establishing an interbank and foreign exchange market
would be needed to begin addressing dollarization, including by allowing more exchange rate
flexibility.
28.
Financial supervision. The transition to risk-based supervision and the rapid expansion of
the banking system continued to put additional burden on the supervisory capacity, and in this
context, the 2010 FSAP recommendation of imposing a moratorium on new bank licenses remains
appropriate. In view of the limited resources, focusing on key emerging risks would improve the
supervisory effectiveness. Strengthening the financial crisis management framework is critical in
managing systemic risks and minimizing potential fiscal costs. The signing of an initial MoU between
supervisory agencies is welcome, and should be used to enhance cooperation at the policy and
technical levels, and expedite preparation of a second MoU on crisis resolution.
29.
Diversification and inclusive growth. Cambodia has made good progress in achieving the
Millennium Development Goals and reduced poverty substantially. Continued improvements in
human capital, including through education and training, infrastructure, and business climate are
needed to promote inclusive and sustainable growth and further reduce poverty and income
inequality. Plans to reduce regulatory impediments to doing business are welcome, while improving
education outcomes to catch up with peers would take longer term efforts. Given the budgetary
constraints, the near term priority would be improving efficiency and reallocating spending within
the budget envelope. New initiatives, such as establishing a national training fund, could be
considered over the medium term following the successful implementation of PFM reforms.
30.
Arrears. Good faith efforts to resolve external arrears are welcome and should continue.
31.
cycle.
It is recommended that the next Article IV consultation take place on the standard 12-month
19
CAMBODIA
Table 1. Cambodia: Selected Economic Indicators, 201014

2010
2011
2012
Est.
6.1
6.9
4.0
3.0
3.1
4.0
7.1
8.6
3.1
3.4
4.9
5.5
7.3
8.4
4.3
1.3
2.5
2.9
7.0
8.6
2.4
3.1
4.1
2.9
7.2
8.3
4.0
3.1
3.0
3.4
Saving and investment balance (in percent of GDP)

Gross national saving
Government saving
Private saving
Gross fixed investment
Government investment
Private investment 1/
13.4
0.5
12.9
17.3
9.6
7.7
13.9
1.0
12.9
22.0
8.7
13.3
14.8
1.7
13.1
23.5
9.0
14.5
14.9
2.2
12.7
23.5
8.8
14.7
13.1
2.2
10.9
21.5
8.1
13.4
Money and credit (annual percent change, unless otherwise indicated)

Broad money
Net credit to the government 2/
Private sector credit
Velocity of money 3/
20.0
0.8
23.4
2.6
21.4
0.0
31.2
2.4
20.9
-1.5
28.0
2.2
17.7
-3.6
28.0
2.1
23.7
-2.6
24.0
2.1
Public finance (in percent of GDP)

Revenue
Domestic revenue
Of which : Tax revenue
Grants
Expenditure
Expense
Net acquisition of nonfinancial assets
Net lending (+)/borrowing(-)
Net acquisition of financial assets
Net incurrence of liabilities 4/
Of which: Domestic financing
17.0
12.1
10.1
4.9
19.9
10.8
9.1
-2.8
-0.3
2.6
0.9
15.6
12.3
10.1
3.2
19.6
11.3
8.3
-4.1
0.0
4.1
0.7
16.9
14.1
11.3
2.8
20.7
12.0
8.7
-3.8
0.6
4.4
-0.4
17.1
13.9
11.7
3.2
20.1
11.6
8.5
-3.0
0.4
3.4
-0.4
17.4
14.5
12.2
2.9
20.2
12.4
7.8
-2.8
0.1
2.9
-0.1
3,884
29.7
-5,466
21.7
-441
-3.9
2,653
3.7
67.9
5,219
34.4
-7,260
32.8
-1,040
-8.1
3,032
3.6
64.0
6,016
15.3
-8,426
16.1
-1,233
-8.7
3,463
3.6
58.2
6,992
16.2
-9,789
16.2
-1,339
-8.6
3,824
3.6
55.4
8,002
14.4
-11,135
13.7
-1,430
-8.4
4,327
3.7
50.7
3,337
28.7
77
1.4
3,841
29.7
88
1.2
4,486
31.6
89
1.0
5,052
32.8
115
1.1
5,559
33.1
147
1.3
47,102
11,255
4,185
52,154
12,890
4,046
56,711
14,118
4,017
62,559
69,195
Output and prices (annual percent change)

GDP in constant prices
(Excluding agriculture)
Real agricultural output
GDP deflator
Inflation (end-year)
(Annual average)
Balance of payments (in millions of dollars, unless otherwise indicated)

Exports, f.o.b.
(Annual percent change)
Imports, f.o.b. 5/
(Annual percent change)
Current account (including official transfers)
(In percent of GDP)
Gross official reserves 6/
(In months of prospective imports)
(In percent of foreign currency deposits)
External debt (in millions of dollars, unless otherwise indicated)
Public external debt 7/
(In percent of GDP)
Public debt service
(In percent of exports of goods and services)
Memorandum items:
Nominal GDP (in billions of riels)
(In millions of U.S. dollars)
Exchange rate (riels per dollar; period average)
2013
Proj.
Sources: Cambodian authorities; and IMF staff estimates and projections.

1/ From 2011, includes FDI related to public-private power sector projects.
2/ Net credit to the government refers to its contribution to broad money growth.
3/ Ratio of nominal GDP to the average stock of broad money.
4/ Includes statistical discrepancy.
5/ From 2011, includes imports related to public-private power sector projects.
6/ Excludes unrestricted foreign currency deposits held as reserves at the National Bank of Cambodia; starting in 2009,
includes the new SDR allocations made by the IMF of SDR 68.4 million.
7/ Debt owed to the Russian Federation is valued at 0.6 rubles per U.S. dollar with the standard 70 percent discount.
20
2014
CAMBODIA
Table 2. Cambodia: Medium-Term Macroeconomic Framework, 201018

2010
2011
2012
Est.
6.1
3.0
3.1
7.1
3.4
4.9
7.3
1.3
2.5
7.0
3.1
4.1
7.2
3.1
3.0
7.3
3.1
3.0
7.3
3.0
3.0
7.5
2.9
3.0
7.5
2.8
3.0
13.4
0.5
12.9
17.3
9.6
7.7
13.9
1.0
12.9
22.0
8.7
13.3
14.8
1.7
13.1
23.5
9.0
14.5
14.9
2.2
12.7
23.5
8.8
14.7
13.1
2.2
10.9
21.5
8.1
13.4
14.6
2.6
11.9
22.0
7.8
14.2
15.4
3.1
12.3
22.0
7.4
14.6
15.9
3.6
12.3
22.0
7.5
14.5
16.7
4.1
12.6
22.2
7.4
14.8
17.0
12.1
10.1
4.9
19.9
10.8
9.1
1.9
-2.8
-7.8
-0.3
2.6
0.9
5.1
15.6
12.3
10.1
3.2
19.6
11.3
8.3
1.8
-4.1
-7.3
0.0
4.1
0.7
4.6
16.9
14.1
11.3
2.8
20.7
12.0
8.7
1.6
-3.8
-6.6
0.6
4.4
-0.4
4.9
17.1
13.9
11.7
3.2
20.1
11.6
8.5
1.8
-3.0
-6.1
0.4
3.4
-0.4
4.7
17.4
14.5
12.2
2.9
20.2
12.4
7.8
1.9
-2.8
-5.7
0.1
2.9
-0.1
4.7
18.0
15.0
12.7
2.9
19.7
12.4
7.3
2.1
-1.7
-4.7
0.4
2.2
-0.4
4.8
18.2
15.5
13.2
2.7
19.3
12.4
7.0
2.3
-1.1
-3.9
0.5
1.6
-0.5
4.9
18.6
16.0
13.7
2.6
19.4
12.4
7.0
2.7
-0.8
-3.4
0.6
1.4
-0.6
5.2
18.9
16.5
14.2
2.4
19.3
12.4
7.0
3.0
-0.4
-2.8
0.7
1.1
-0.7
5.5
Balance of payments (in percent of GDP, unless otherwise indicated)

Exports (percent change) 2/
29.7
22.7
Imports (percent change) 3/
Current account balance (including transfers)
-3.9
(Excluding transfers)
-10.7
6.8
Foreign direct investment 4/
-1.6
Other flows 5/
Overall balance
1.3
34.4
33.9
-8.1
-11.9
11.5
-1.1
2.4
15.3
16.4
-8.7
-12.1
11.3
0.1
2.6
16.2 14.4 13.0

16.5 14.0 10.3
-8.6 -8.4 -7.4
-11.7 -11.3 -10.0
10.4
8.6
8.1
0.5
2.7
1.9
2.2
2.9
2.6
12.2
9.9
-6.6
-9.0
7.9
1.4
2.7
11.7
10.3
-6.1
-8.2
7.9
1.3
3.1
11.2
10.2
-5.5
-7.5
7.4
1.0
2.9
Gross official reserves (in millions of U.S. dollars) 6/

(In months of next year's imports)
2,653 3,032
3.7
3.6
3,463
3.6
3,824 4,327 4,820 5,382 6,069 6,781

3.6
3.7
3.7
3.8
3.9
3.9
Public external debt (in millions of U.S. dollars) 7/

(In percent of GDP)
Public external debt service (in millions of U.S. dollars) 8/
(In percent of exports of goods and services)
3,337 #3,841
28.7A 29.7
77
88
1.4
1.2
4,486
31.6
89
1.0
5,052 5,559 5,949 6,311 6,624 6,929

32.8 33.1 32.3 31.4 30.1 28.8
115 147 162 215 228
213
1.1
1.3
1.3
1.5
1.5
1.2
Output and prices (percent change)

GDP at constant prices
GDP deflator
Consumer prices (end-year)
Government saving
Private saving
Government investment
Private investment 1/
Revenue
Domestic revenue
Of which: Tax revenue
Grants
Total expenditure
Expense
Of which: Domestically-financed
Net lending (+)/borrowing(-) excluding grants
Net incurrence of liabilities
Domestic financing, net
Government deposits
2013 2014 2015 2016 2017

Proj.
2018

1/ Includes nonbudgetary, grant-financed investment, and, from 2011, public-private partnerships in the power sector projects.
2/ Excludes re-exported goods.
3/ Excludes imported goods for re-export; from 2011, includes imports related to public-private power sector projects.
5/ Net official disbursements, exceptional financing, and official transfers.
includes the new SDR allocations made by the IMF.
8/ Cash basis, excluding the accumulation of arrears on debt owed to the Russian Federation and the United States.
21
CAMBODIA
Table 3. Cambodia: Balance of Payments, 201018
(In millions of U.S. dollars, unless otherwise indicated)
2010
2011
Est.
2012
2013
2014
-441
-1,203
-1,582
3,884
2,995
-5,466
-1,359
-485
168
697
1,180
-530
212
762
-1,040
-1,533
-2,040
5,219
3,901
-7,260
-1,757
-999
194
889
1,616
-696
313
493
-1,233
-1,708
-2,410
6,016
4,274
-8,426
-2,177
-1,147
417
1,158
1,957
-741
285
475
-1,339
-1,814
-2,797
6,992
4,910
-9,789
-2,455
-1,312
672
1,399
2,211
-727
311
475
-1,430
-1,905
-3,132
8,002
5,557
-11,135
-2,945
-1,375
889
1,680
2,509
-791
339
475
584
393
436
-43
762
-415
1,345
487
536
-49
1,484
40
1,606
648
694
-46
1,598
-330
1,683
534
607
-73
1,611
-366
1,917
459
556
-97
1,459
0
Unrestricted foreign currency deposit at NBC
-243
127
-256
-289
Commercial banks
Other short-term flows and errors and omissions
-173
-155
-87
-666
-73
-310
-77
-96
0
0
0
0
0
0
0
0
0
0
143
305
373
345
487
481
550
676
700
-143
-161
0
0
18
-305
-321
0
0
16
-373
-388
0
0
15
-345
-361
0
0
16
-487
-504
0
0
16
-481
-493
0
0
12
-550
-562
0
0
12
-676
-687
0
0
12
-700
-712
0
0
12
-10.7
-3.9
-14.1
2,653
3.7
-11.9
-8.1
-15.8
3,032
3.6
-12.1
-8.7
-17.1
3,463
3.6
-11.7
-8.6
-18.0
3,824
3.6
-11.3
-8.4
-18.5
4,327
3.7
-10.0
-7.4
-17.4
4,820
3.7
-9.0
-6.6
-16.5
5,382
3.8
-8.2
-6.1
-15.9
6,069
3.9
-7.5
-5.5
-15.5
6,781
3.9

(Excluding official transfers)
Trade balance
Exports, f.o.b.
Of which: Garments
Imports, f.o.b. 1/
Of which: Garments-related
Petroleum
Services and income (net)
Services (net)
Of which: Tourism (credit)
Income (net)
Private transfers (net)
Official transfers (net)
Capital and financial account
Medium- and long-term loans (net)
Disbursements
Amortization
Foreign direct investment 2/
Net foreign assets of deposit money banks 3/
Overall balance
Financing
Change in gross official reserves 4/
Use of IMF credit
Debt restructuring
Accumulation of arrears
Memorandum items:
Current account balance (in percent of GDP)
Excluding official transfers
Including official transfers
Trade balance (in percent of GDP)
(In months of next year's imports)
2015
Proj.
2016
2017
2018
-1,373
-1,848
-3,227
9,041
6,201
-12,269
-3,287
-1,450
1,009
1,861
2,711
-852
370
475
-1,340
-1,815
-3,326
10,141
6,841
-13,466
-3,626
-1,546
1,107
1,971
2,898
-864
404
475
-1,340
-1,815
-3,515
11,328
7,487
-14,843
-3,968
-1,673
1,258
2,101
3,121
-843
442
475
-1,338
-1,813
-3,743
12,592
8,137
-16,335
-4,313
-1,817
1,446
2,229
3,342
-783
484
475
1,854
353
462
-109
1,500
0
1,890
292
450
-158
1,598
0
2,016
279
448
-170
1,737
0
2,038
243
447
-204
1,795
0

1/ From 2011, includes imports related to public-private power sector projects.
3/ Includes unrestricted foreign currency deposits (FCDs) held as reserves at the National Bank of Cambodia (NBC).
4/ Excludes changes in unrestricted FCDs held as reserves at the NBC, and changes in gold holdings and valuation.
5/ Excludes unrestricted FCDs held at the NBC; starting in 2009, includes the new SDR allocations made by the IMF of SDR 68.4 million.
22
CAMBODIA
Table 4. Cambodia: General Government Operations, 201014 (GFSM 2001)
2010
2011
2012
Budget
Jan-Aug
Est.
2013
Est.
Budget
6,165
9,590
5,111
8,017
2014
Budget
Actual
Budget 1/
Actual
Jan-Aug
Prel.Est.
Proj.
Proj.
6,807
8,023
8,064
8,114
8,900
5,537
5,698
6,372
6,436
7,280
10,566
6,694
10,700
12,069
8,584
5,521
8,718
10,067
4,824
4,751
5,462
5,289
6,263
4,190
6,424
7,301
4,653
7,309
8,440
968
800
1,044
960
1,278
939
1,276
1,562
1,117
1,550
1,780
Good and services
2,744
2,792
3,192
3,123
3,624
2,396
3,815
4,204
2,605
4,205
4,910
International trade and transactions
1,112
1,159
1,226
1,206
1,361
855
1,333
1,535
932
1,554
1,750
1,270
2,325
1,692
1,678
1,620
1,054
1,572
1,982
1,173
1,982
2,002
713
947
910
1,147
1,017
921
1,593
1,283
867
1,409
1,627
6,529 11,740
13,993
(In billions of riels)

Revenue
Of which: Nongrant
Tax
Income, profits, and capital gains
Grants
Other revenues 2/
Total expenditure
8,114
9,363
9,543
10,236
10,431
11,661
6,836
12,557
5,167
5,068
5,851
5,888
6,518
3,945
6,818
7,365
4,105
7,259
8,570
Compensation of employees
2,146
2,135
2,379
2,290
2,735
1,695
2,660
3,092
1,845
3,149
3,829
1,594
1,742
1,954
1,962
2,045
1,112
2,310
2,234
1,168
2,234
2,506
120
143
140
160
171
107
305
256
125
256
282
Expense not elsewhere classified
1,307
1,050
1,379
1,476
1,566
1,031
1,543
1,784
967
1,620
1,953

Of which: Externally-financed
2,947
4,295
3,692
4,348
3,913
2,584
4,922
4,296
2,732
5,299
5,423
2,000
3,420
2,600
3,403
2,860
2,138
4,023
3,146
2,233
4,149
4,096
-1,307
-1,340
-1,479
-2,122
-1,531
-364 -2,150
-1,095
-143
-1,858
-1,924
Expense
Interest

Of which: External
-195
-125
-498
-3
-521
292
363
11
396
251
100
1,112
1,215
981
2,119
1,010
656
2,514
1,106
538
2,109
2,024
880
924
860
1,779
1,010
1,068
2,350
1,106
1,119
2,109
2,024
17.4
(In percent of GDP)

Revenue
Of which: Nongrant
14.5
17.0
15.5
15.6
15.7
10.9
16.9
16.9
10.7
17.1
11.8
12.1
12.2
12.3
12.8
9.0
14.1
13.7
8.8
13.9
14.5
10.2
10.1
10.5
10.1
11.0
7.4
11.3
11.7
7.4
11.7
12.2
Income, profits, and capital gains tax
2.1
1.7
2.0
1.8
2.3
1.7
2.3
2.5
1.8
2.5
2.6
Good and services tax
5.8
5.9
6.1
6.0
6.4
4.2
6.7
6.7
4.2
6.7
7.1
International trade and transactions tax
2.4
2.5
2.4
2.3
2.4
1.5
2.4
2.5
1.5
2.5
2.5
Grants
2.7
4.9
3.2
3.2
2.9
1.9
2.8
3.2
1.9
3.2
2.9
Other revenues 2/
1.5
2.0
1.7
2.2
1.8
1.6
2.8
2.1
1.4
2.3
2.4
Tax
Total expenditure
Expense
17.2
19.9
18.3
19.6
18.4
11.5
20.7
18.6
10.9
20.1
20.2
11.0
10.8
11.2
11.3
11.5
7.0
12.0
11.8
6.6
11.6
12.4
Compensation of employees
4.6
4.5
4.6
4.4
4.8
3.0
4.7
4.9
2.9
5.0
5.5
3.4
3.7
3.7
3.8
3.6
2.0
4.1
3.6
1.9
3.6
3.6
Interest
0.3
0.3
0.3
0.3
0.3
0.2
0.5
0.4
0.2
0.4
0.4
Expense not elsewhere classified
2.8
2.2
2.6
2.8
2.8
1.8
2.7
2.9
1.5
2.6
2.8

Of which: Externally-financed
6.3
9.1
7.1
8.3
6.9
4.6
8.7
6.9
4.4
8.5
7.8
4.2
7.3
5.0
6.5
5.0
3.8
7.1
5.0
3.6
6.6
5.9
-2.8
-2.8
-2.8
-4.1
-2.7
-0.6
-3.8
-1.7
-0.2
-3.0
-2.8
-0.4
-0.3
-1.0
0.0
-0.9
0.5
0.6
0.0
0.6
0.4
0.1
2.4
2.6
1.9
4.1
1.8
1.2
4.4
1.8
0.9
3.4
2.9
1.9
2.0
1.6
3.4
1.8
1.9
4.1
1.8
1.8
3.4
2.9

Of which: External
Memorandum items:
Priority sector spending 4/
3.0
3.7
3.8
3.8
4.2
2.4
4.0
4.2
2.4
4.2
4.2
-5.5
-7.8
-6.1
-7.3
-5.6
-2.5
-6.6
-4.9
-2.1
-6.1
-5.7
Domestic financing 5/
0.9
0.9
1.2
0.7
0.9
-1.2
-0.4
0.0
-1.6
-0.4
-0.1
Government deposits
5.1
4.6
4.7
4.9
5.0
4.7
4.7
47,102
47,102
52,154
52,154
56,711
56,711
56,711
62,559
62,559
62,559
69,195
Net lending (+)/borrowing(-) excluding grant
GDP (in billions of riels)
Sources: Data provided by the Cambodian authorities; and IMF staff estimates and projections.
1/ Includes supplementary budget.
2/ Includes provincial tax and nontax revenue.
3/ Includes statistical discrepancy.
4/ Current spending by the ministries of public health; education, youth and sport; agriculture, forestry and fishery; rural development; women's affairs; justice; urbanization and construction;
labor and vocational training.
5/ The figure is different from the domestic financing figure in Table 5 (GFSM 1986) because of differences in classification, in particular for capital revenue.
23
CAMBODIA
Table 5. Cambodia: General Government Operations, 201014 (GFSM 1986)
2010
2011
Budget
Actual Budget 1/
Est.
Budget
2012
Jan-Aug
Est.
2013
Budget Jan-Aug.
Prel. est.
Est.
Proj.
2014
Budget
Proj.
Prel.

Total revenue
Tax revenue
Direct taxes
Indirect taxes
Of which: Trade taxes
Provincial taxes
Nontax revenue
Capital revenue 2/
5,838
4,763
968
3,664
1,022
131
774
300
6,160
4,795
800
3,745
1,063
249
904
461
6,752
5,487
1,044
4,204
1,136
240
885
380
6,822
5,476
960
4,132
1,093
385
959
386
7,612
6,291
1,278
4,774
1,241
240
989
332
5,361
4,344
939
3,104
781
301
767
250
8,596
6,674
1,276
4,932
1,218
465
1,344
579
8,936
7,486
1,562
5,515
1,425
409
1,099
352
5,622
4,834
1,117
3,394
854
324
686
99
9,070
7,526
1,550
5,478
1,438
498
1,192
352
10,345 10,427
8,576 8,616
1,776 1,780
6,256 6,236
1,621 1,619
544
601
1,430 1,451
339
359
Total expenditure
Current expenditure
Wages
Nonwage
Provincial expenditure
Capital expenditure
Locally financed
Externally financed
Net lending
8,366
5,245
2,092
2,882
271
3,121
1,121
2,000
0
9,703
5,164
2,083
2,919
161
4,531
1,111
3,420
8
10,097
5,912
2,316
3,364
232
3,955
1,355
2,600
230
10,744
5,997
2,233
3,521
243
4,548
1,145
3,403
198
10,790
6,603
2,673
3,628
302
4,080
1,220
2,860
107
6,614
3,976
1,659
2,169
148
2,595
457
2,138
43
12,176
6,946
2,598
4,039
308
5,122
1,100
4,023
107
12,052
7,450
3,029
4,133
287
4,481
1,335
3,146
122
6,958
4,146
1,805
2,201
140
2,761
528
2,233
51
12,949
7,344
3,086
3,970
287
5,484
1,335
4,149
122
13,654 14,202
8,658 8,570
3,782 3,782
4,444 4,400
432
388
4,996 5,632
1,536 1,536
3,460 4,096
0
0
-2,529
-3,543
-3,344
-3,922
-3,178
-1,253
-3,579
-3,116
-1,336
-3,879
-3,309 -3,775
2,529
2,150
1,270
1,030
-150
379
3,543
3,249
2,325
1,064
-140
295
3,344
2,552
1,692
1,040
-180
792
3,922
3,457
1,678
1,943
-164
465
3,178
2,630
1,620
1,260
-250
548
1,253
2,122
1,054
1,183
-115
-869
3,579
3,923
1,572
2,541
-190
-344
3,116
3,088
1,982
1,386
-280
28
1,336
2,292
1,173
1,265
-146
-956
3,879
4,091
1,982
2,389
-280
-212
3,309
3,389
1,670
2,050
-331
-80
3,775
4,025
2,002
2,355
-331
-250
Overall balance
Financing
Foreign (net)
Grants
Loans
Amortization
Domestic (net) 3/
(In percent of GDP)

Total revenue
Of which: Central government
12.4
12.1
10.1
2.1
7.8
2.2
1.6
0.6
13.1
12.5
10.2
1.7
8.0
2.3
1.9
1.0
12.9
12.4
10.5
2.0
8.1
2.2
1.7
0.7
13.1
12.3
10.5
1.8
7.9
2.1
1.8
0.7
13.4
13.0
11.1
2.3
8.4
2.2
1.7
0.6
9.5
8.9
7.7
1.7
5.5
1.4
1.4
0.4
15.2
14.3
11.8
2.3
8.7
2.1
2.4
1.0
14.3
13.6
12.0
2.5
8.8
2.3
1.8
0.6
9.0
8.4
7.7
1.8
5.4
1.4
1.1
0.2
14.5
13.7
12.0
2.5
8.8
2.3
1.9
0.6
15.0
14.1
12.4
2.6
9.0
2.3
2.1
0.5
15.1
14.2
12.5
2.6
9.0
2.3
2.1
0.5
17.8
11.1
4.4
6.1
0.6
20.6
11.0
4.4
6.2
0.3
19.4
11.3
4.4
6.5
0.4
20.6
11.5
4.3
6.8
0.5
19.0
11.6
4.7
6.4
0.5
11.7
7.0
2.9
3.8
0.3
21.5
12.2
4.6
7.1
0.5
19.3
11.9
4.8
6.6
0.5
11.1
6.6
2.9
3.5
0.2
20.7
11.7
4.9
6.3
0.5
19.7
12.5
5.5
6.4
0.6
20.5
12.4
5.5
6.4
0.6
6.6
2.4
4.2
0.0
9.6
2.4
7.3
0.0
7.6
2.6
5.0
0.4
8.7
2.2
6.5
0.4
7.2
2.2
5.0
0.2
4.6
0.8
3.8
0.1
9.0
1.9
7.1
0.2
7.2
2.1
5.0
0.2
4.4
0.8
3.6
0.1
8.8
2.1
6.6
0.2
7.2
2.2
5.0
0.0
8.1
2.2
5.9
0.0
Overall balance
-5.4
-7.5
-6.4
-7.5
-5.6
-2.2
-6.3
-5.0
-2.1
-6.2
-4.8
-5.5
Financing
Foreign (net)
Grants
Loans
Amortization
Domestic (net) 3/
5.4
4.6
2.7
2.2
-0.3
0.8
7.5
6.9
4.9
2.3
-0.3
0.6
6.4
4.9
3.2
2.0
-0.3
1.5
7.5
6.6
3.2
3.7
-0.3
0.9
5.6
4.6
2.9
2.2
-0.4
1.0
2.2
3.7
1.9
2.1
-0.2
-1.5
6.3
6.9
2.8
4.5
-0.3
-0.6
5.0
4.9
3.2
2.2
-0.4
0.0
2.1
3.7
1.9
2.0
-0.2
-1.5
6.2
6.5
3.2
3.8
-0.4
-0.3
4.8
4.9
2.4
3.0
-0.5
-0.1
5.5
5.8
2.9
3.4
-0.5
-0.4
47,102
47,102
52,154
52,154
56,711
56,711
56,711
62,559
62,559
62,559
5.1
4.6
4.7
4.9
5.0
4.7
Tax revenue
Direct taxes
Indirect taxes
Of which: Trade taxes
Nontax revenue
Capital revenue 2/
Total expenditure and net lending
Current expenditure
Wages
Nonwage
Provincial expenditure
Capital expenditure
Locally financed
Externally financed
Net lending
Memorandum item:
GDP (in billions of riels)
Government deposits (percent of GDP)
Sources: Data provided by the Cambodian authorities; and IMF staff estimates and projections.
1/ Includes supplementary budget.
2/ Includes privatization proceeds.
3/ Includes statistical discrepancy. The figure is different from the domestic financing figure in Table 4 (GFSM 2001) because of differences in classification, in particular for
capital revenue.
24
69,195 69,195
4.7
CAMBODIA
Table 6. Cambodia: Monetary Survey, 201014
2010
2011
Mar
2012
Jun
Sep
Dec
Mar
2013
Jun
Sep
Dec
Proj.
2014
Dec
Proj.

Net foreign assets
National Bank of Cambodia
Foreign assets
Foreign liabilities
Deposit money banks
Foreign assets
Foreign liabilities
17,054
14,982
15,410
428
2,072
3,864
1,792
18,426
16,010
16,435
425
2,416
4,714
2,298
19,390
17,127
17,551
424
2,263
5,819
3,556
20,717
17,675
18,098
423
3,042
7,319
4,277
20,483
18,226
18,653
427
2,257
7,103
4,846
21,265
18,583
19,003
421
2,682
8,721
6,038
22,549
20,026
20,437
410
2,523
8,389
5,866
21,773
19,019
19,438
418
2,754
8,317
5,563
18,721
16,868
17,295
427
1,852
8,444
6,592
21,854
19,721
20,142
421
2,133
8,187
6,054
24,324
22,311
22,731
421
2,013
8,539
6,526
Net domestic assets

Domestic credit
Government (net)
Private sector
Other items (net)
2,423
10,850
-2,127
12,975
-8,428
5,215
14,898
-2,123
17,021
-9,684
5,473
15,509
-2,542
18,051
-10,035
5,935
17,044
-2,400
19,440
-11,110
6,381
18,178
-2,441
20,615
-11,797
7,327
19,312
-2,486
21,793
-11,985
7,932
20,218
-2,992
23,199
-12,286
9,886
22,148
-3,013
25,146
-12,262
10,635
23,646
-2,808
26,445
-13,011
11,787
24,924
-2,977
27,895
-13,137
17,279
31,369
-3,227
34,590
-14,090
Broad money
Narrow money
Currency in circulation
Demand deposits
Quasi-money
Time deposits
Foreign currency deposits
19,477
3,221
3,099
122
16,256
408
15,848
23,640
3,956
3,772
185
19,684
557
19,127
24,864
3,985
3,811
174
20,879
896
19,983
26,652
3,872
3,632
240
22,780
625
22,155
26,864
3,818
3,591
227
23,046
683
22,363
28,592
4,046
3,756
290
24,546
780
23,766
30,481
4,501
4,223
278
25,980
671
25,309
31,659
4,586
4,237
349
27,073
745
26,328
29,356
4,721
4,319
402
24,635
911
23,723
33,641
4,713
4,319
394
28,928
897
28,031
41,603
5,456
4,967
490
36,147
1,031
35,116
16.2
23.4
20.0
3.2
24.3
8.0
31.2
21.4
21.7
20.7
11.4
32.9
22.6
12.7
21.9
5.1
29.4
18.8
16.7
18.8
-8.6
28.3
9.3
20.3
6.1
2.8
28.0
17.7
15.0
17.9
11.3
24.0
23.7
15.0
25.3
14.7
5.3
15.9
0.8
15.2
-10.6
7.0
14.3
20.8
0.0
20.8
-6.4
4.1
1.3
3.0
-2.1
5.1
-1.7
9.7
3.3
9.8
-1.3
11.0
-6.5
8.7
5.2
14.5
-1.4
15.9
-9.3
12.0
8.9
18.7
-1.5
20.2
-9.7
12.7
9.9
18.9
-1.8
20.7
-9.1
4.0
14.8
19.1
-2.3
21.4
-4.3
-9.5
12.3
16.1
-1.2
17.3
-3.8
2.1
15.6
19.6
-1.7
21.3
-4.0
7.3
16.3
19.2
-0.7
19.9
-2.8
3,910
81.4
3,629
18.6
3,201
24.8
12,530
79.1
2.6
1.9
17.2
4,736
80.9
4,513
19.1
4,214
32.6
16,583
86.7
2.4
2.1
7.7
5,002
80.4
4,881
19.6
4,518
31.8
17,869
89.4
2.3
2.1
15.5
5,546
83.1
4,497
16.9
4,866
34.3
19,252
86.9
2.2
2.1
15.6
5,598
83.2
4,501
16.8
5,160
36.4
20,423
91.3
2.2
2.1
17.7
5,949
83.1
4,826
16.9
5,455
38.4
21,609
90.9
2.2
2.2
19.0
6,316
83.0
5,172
17.0
5,789
37.1
22,959
90.7
2.1
2.1
22.8
6,570
83.2
5,331
16.8
6,275
40.2
24,902
94.6
2.0
2.3
11.5
5,920
80.8
5,632
19.2
6,600
42.3
26,201
110.4
2.1
2.5
-6.3
6,995
83.3
5,610
16.7
6,961
44.6
27,647
98.6
2.1
2.4
7.6
8,536
84.4
6,488
15.6
8,409
59.2
34,282
97.6
2.1
2.5
16.0
(12-month percentage change)

Net foreign assets
Broad money
Of which: Currency in circulation
Foreign currency deposits
11.6
31.1
21.1
8.8
22.8
12.4
30.0
18.7
1.7
21.1
15.4
28.0
20.9
-0.4
24.3
16.3
28.5
22.6
10.8
26.7
(Contribution to year-on-year growth of broad money, in percentage points)

Net foreign assets
Net domestic assets
Domestic credit 1/
Government (net)
Private sector
Other items (net)
Memorandum items:
Foreign currency deposits (in millions of U.S. dollars)
(In percent of broad money)
Riel component of broad money
(In percent of broad money)
Credit to the private sector (in millions of U.S. dollars)
(In percent of GDP)
Foreign Currency Loans
Loan-to-deposit ratio (in percent) 2/
Velocity 3/
Money multiplier (broad money/reserve money)
Reserve money (12-month percent change)

1/ Revisions of monetary survey to exclude banks credits to nonresident.
2/ Foreign currency loans and deposits only.
3/ The ratio of nominal GDP to the year-to-date average stock of broad money.
25
CAMBODIA
Table 7. Cambodia: Core Financial Soundness Indicators (FSIs), 200813
(In percent)
2008
2009
2010
2011
2012
2013
Mar
Jun
Sep
Dec
Mar
Jun
Sep
Dec
Mar
Jun
Capital-based FSIs
Regulatory capital to risk-weighted assets
Regulatory tier 1 capital to risk-weighted assets
Nonperforming loans net of provisions to capital
Return on equity 1/
Net open position in foreign exchange to capital
27.6
27.7
5.9
12.4
0.9
32.3
33.0
5.3
4.9
1.4
31.4
32.1
3.8
6.5
2.3
31.2
29.5
3.9
9.0
3.1
29.0
27.7
4.6
9.6
3.0
27.5
26.3
5.4
10.5
3.9
26.2
26.3
3.3
9.7
3.9
29.1
29.3
3.8
11.2
2.9
28.8
28.9
3.5
11.0
3.4
27.2
27.3
4.3
10.5
1.8
25.0
25.3
3.5
10.2
2.0
25.6
26.1
3.4
12.9
1.6
25.6
25.7
3.6
11.6
1.2
Asset-based FSIs
Nonperforming loans to total gross loans
Return on assets 1/
Liquid assets to total assets
Liquid assets to short-term liabilities
2.9
2.7
14.2
30.6
3.9
1.0
19.4
26.8
2.9
1.3
18.0
25.2
2.9
1.9
17.9
25.2
3.0
1.8
17.9
25.3
3.0
2.0
19.0
27.0
2.1
1.8
16.2
23.0
2.4
2.3
17.2
24.3
2.2
2.1
17.5
24.4
2.5
1.9
16.1
22.5
2.0
1.7
15.4
21.2
1.9
2.3
16.2
22.4
2.1
2.1
16.0
22.2
Sectoral distribution of loans to total gross loans

Residents
Deposit-takers
Central bank
Other financial corporations
General government
Nonfinancial corporations
Other domestic sectors
Nonresidents
94.4
3.8
0.0
0.0
0.0
70.6
20.1
5.6
95.0
6.5
0.0
0.0
0.0
71.1
17.5
5.0
91.8
4.4
0.0
0.0
0.0
72.3
15.1
8.2
91.0
3.9
0.0
0.0
0.0
72.2
14.9
9.0
90.8
4.7
0.0
0.0
0.0
71.3
14.8
9.2
91.1
4.9
0.0
0.0
0.0
71.1
15.1
8.9
92.3
7.7
0.0
0.0
0.0
69.5
15.1
7.7
88.3
8.1
0.0
0.0
0.0
65.8
14.4
11.7
85.7
7.9
0.0
0.0
0.0
63.8
14.0
14.3
87.1
8.4
0.0
0.0
0.0
64.1
14.6
12.9
84.0
7.7
0.0
0.0
0.0
62.0
14.3
16.0
86.6
8.1
0.0
0.0
0.0
63.8
14.7
13.5
87.2
7.9
0.0
0.0
0.0
63.8
15.6
12.8
Income- and expense-based FSIs

Interest margin to gross income
Noninterest expenses to gross income
48.3
64.2
60.8
64.2
62.2
63.2
67.7
56.8
65.3
57.9
63.6
56.1
64.3
57.5
63.1
53.9
65.6
54.7
66.7
53.6
66.6
53.9
69.9
49.5
68.2
51.1
Source: National Bank of Cambodia.

1/ Annualized.
26
CAMBODIA
Table 8. Cambodia: Key 2010 FSAP Recommendations of High Priority

Recommendation
Timeframe 1/
Status
Short term
In process
Ensure that banks retain an appropriate level of liquid assets to be able to meet
short-term obligations by enforcing existing regulations.
Short term
In process
Upgrade law to formalize delineation of responsibilities among supervisors, and

establish procedures, through MOUs, for practical information exchange, coordination
Short term
Initiated but not

concluded
Medium term
In process
Medium term
In process
General Stability
Improve the quality of data to enable an appropriate assessment of risks, and to
enhance the reliability of stress tests, including through strengthening supervision; and
collecting additional credit-related information.
and accountability among domestic supervisors (NBC, MEF, SECC), and with foreign
supervisors.
Upgrade both the number and capacity of staff in the areas of banking, insurance,
securities and payment system supervision; develop training programs for financial
institutions on accounting, corporate governance, risk management, and for the
external audit profession.
Develop and implement a strategic plan to address the conflicts and overlaps in
the financial sector legal and regulatory framework.
Supervision and Regulation
Banking
Develop supervisory strategy to deal with banks that cannot meet the new capital
Short term
Done
requirement.
Conduct comprehensive upgrades to the legal framework.
Short term
In process
Reprioritize the work performed by the staff to facilitate forward-looking, risk-
Short term
In process
based supervision.
Impose a moratorium on new bank licenses as long as supervisory capacity and
resources remain inadequate.
Short term
Under NBC
review
Nonbank Financial Sector

Revise capital regulations in concert with liability, investment and accounting rules
to better reflect the risks in a growing insurance market.
Short term
Done
Enhance powers for intervention, corrective measures and enforcement.

Conduct a readiness study prior to the launch of the stock exchange.
Short term
Short term
In process
Done
Medium term
In process
Medium term
In preparation
Short term
Done
Medium term
In preparation
Medium term
In preparation
Short term
In preparation
Short-term
Done
Short-term
In preparation
Access to Finance
Enhance supervisory practices to keep pace with the development of microfinance
deposit-taking institutions, and impose a moratorium as long as supervisory capacity
and resources remain inadequate.
Crisis Management Framework
Revise PCA framework by developing additional triggers for asset quality, liquidity,
and earlier intervention based on the solvency ratio.
Introduce regulation allowing banks to use their fixed deposits at the NBC and any
issue of government (including government bodies) or government-guaranteed
securities as eligible collateral for interbank and NBC repos.
Develop a crisis management framework.
Transparency of Monetary and Financial Policies
Introduce due process for the dismissal of NBC Board members and the Governor
by specifying the legal grounds for doing so, and defining an appeal process.
Amend the law to reduce the governments representation on the Board of the
NBC; and to reflect the practice of appointing two Deputy Governors.
Corporate governance of banks
Draft and/or implement banking regulations on internal audit and controls, risk
management, and compliance functions at banks.
AML/CFT
Introduce new measures for conducting overall AML/CFT risk assessments and risk
profiling of financial institutions.
1/ Short term: up to one year; medium term: one to three years.
27
CAMBODIA
Table 9. Cambodia: Millennium Development Goals (MDG) Indicators

1990 1995 2000 2005 2009 2010 2011 2012 2015
MDG
Target
Goal 1: Eradicate extreme poverty and hunger

Percentage share of income or consumption held by poorest 20 percent
Population below minimum level of dietary energy consumption (percent)
Poverty gap ratio at $1 a day (incidence x depth of poverty)
Poverty headcount ratio at $1.25 per day (PPP, percent of population)
Poverty headcount ratio at national poverty line ( percent of population)
Prevalence of underweight in children (under five years of age)
...
...
...
...
...
...
8.5
...
...
49
...
43
...
...
...
...
...
40
Goal 2: Achieve universal primary education

Net primary enrollment (percent of relevant age group)
Primary completion rate, total (percent of relevant age group)
Proportion of pupils starting grade 1 who reach grade 5
Youth literacy rate (percent of ages 1524)
67
...
...
73
...
42
...
76
Goal 3: Promote gender equality and empower women

Proportion of seats held by women in national parliament (percent)
Ratio of girls to boys in primary and secondary education (percent)
Ratio of young literate females to males (percent ages 1524)
Share of women employed in the nonagricultural sector (percent)
...
73
81
..
Goal 4: Reduce child mortality

Immunization, measles (percent of children ages 1223 months)
Infant mortality rate (per 1,000 live births)
Under five mortality rate (per 1,000)
Goal 5: Improve maternal health
Births attended by skilled health staff (percent of total)
Maternal mortality ratio (modeled estimate, per 100,000 live births)
Goal 6: Combat HIV/AIDS, malaria, and other diseases
Incidence of tuberculosis (per 100,000 people)
Prevalence of HIV, total (percent of population 1549)
Goal 7: Ensure environmental sustainability
Access to an improved water source (percent of population)
Access to improved sanitation (percent of population)
Nationally protected areas (percent of total land area)
Goal 8: Develop a global partnership for development
Aid per capita (current U.S. dollars)
Fixed line and mobile phone subscribers (per 100 people)
Internet users (per 1,000 people)
Personal computers (per 1,000 people)
Total debt service (percent of exports of goods and services)
Goal 9: De-mining, UXO and assistance
Annual numbers of civilian casualties recorded
Percentage of suspected contaminated areas cleared
Other
Fertility rate, total (births per woman)
GNI per capita, Atlas method (current U.S. dollars)
GNI, Atlas method (current, in billions of U.S. dollars)
Gross capital formation (percent of GDP)
Life expectancy at birth, total (years)
Literacy rate, adult total (percent of people ages 15 and above)
Population, total (millions)
Trade (percent of GDP)
...
...
...
11
21
40
53
28
8
...
...
19
24
22
29
21
20
87
47
63
79
90
85
55
83
84
87
96
87
85
98
90
100
100
100
100
...
..
84
..
8
82
89
41
10
..
90
..
21
97
21
20
20
30
100
100
...
34
87
119
62
87
119
65
80
107
79
73
96
92
42
50
93
39
46
93
36
43
90
50
38
..
...
..
...
32
450
44
540
71
206
80
250
585
...
557
...
530
...
505
2
451
1
437
1
424
1
...
0
0
...
19
8
...
38
16
...
...
...
24
63
30
26
65
32
26
67
33
...
...
...
4
0
0
...
..
50
0
...
0
1
31
1
0
1
1
39
8
3
3
1
51
45
1
...
1
51
60
1
...
1
54
100
3
...
1
136
5
...
...
...
...
...
...
... 1,691
10
...
...
797
50
244
53
286
59
240
56
240
56
0
100
4
280
3.6
18
...
68
13
112
3
450
6.2
18
58
...
14
137
3
690
10
21
62
74
14
105
3
740
11
17
63
14
114
3
800
12
17
63
15
114
880
13
15
...
...
...
...
...
...
...
...
6
..
...
8
50
62
10
19
5
280
3.2
15
...
64
11
78
...
33
Sources: World Bank database, World Development Indicators, and Poverty Assessment (2009); UN Human Development Indicators.
Report (2003); Cambodia MDG 2011 update; UN MDG Indicators 2011 (http://mdgs.un.org); and IMF staff estimates.
28
26
DMSDR1S-#5294104-v8-Cambodia_-_2013_-_Article_IV__Debt_Sustainability_Analysis.DOCX 2010 Article IV Report
CAMBODIA
January 9, 2014
STAFF REPORT FOR THE 2013 ARTICLE IV

CONSULTATIONDEBT SUSTAINABILITY ANALYSIS1
Approved By
John Nelmes and Masato Miyazaki (IMF)
Jeffrey D. Lewis and Sudhir Shetty (IDA)
Prepared By

International Development Association
This Debt Sustainability Analysis (DSA) shows that Cambodias debt distress rating remains low
with all debt burden indicators projected to remain below the respective thresholds. In line with
last years DSA, the results also indicate that debt sustainability continues to be vulnerable to
growth, exports, and fiscal shocks, calling for continued structural reforms to diversify growth,
and to mobilize fiscal revenues.
1.
This DSA incorporates some updates compared to the 2012 DSA. The discount rate
is revised upward to 5 percent from 3 percent, reflecting the recent IMF Board decision to link the
discount rate to the 10-year average level of the U.S. dollar Commercial Interest Reference Rate.
The macroeconomic assumptions underlying the baseline scenario remain broadly similar to
last years DSA except that Cambodia is now assumed to issue domestic debt (e.g.,
government bonds) over the long term. The debt-to-GDP ratio at end-2012 was slightly
higher than the previous estimate due to larger disbursement of bilateral debts. Cambodias
Country Policy and Institutional Assessment (CPIA) rating remained unchanged at medium
performer.2
This DSA has been prepared jointly by IMF and World Bank staffs and in consultation with the Asian Development
Bank (AsDB), using the debt sustainability framework for low-income countries approved by the Boards of both
institutions.
2
Cambodias policies and institutions, as measured by the World Banks Country Policy and Institutional Assessment,
continue to be classified as medium performer. The relevant indicative thresholds, applicable to public and publicly
guaranteed external debt, for this category are 40 percent for the net present value (NPV) of debt-to-GDP ratio,
150 percent for the NPV of debt-to-exports ratio, 250 percent for the NPV of debt-to-revenue ratio, 20 percent for the
debt service-to-exports ratio, and 20 percent for the debt service-to-revenue ratio.
CAMBODIA
CAMBODIAS PUBLIC DEBT

2.
At end-2012, the stock of Cambodias external public debt, including arrears, stood at
around US$4.5 billion or 32 percent of GDP (19 percent in NPV terms). The debt-to-GDP ratio has
increased from 27 percent in 2008, partly reflecting greater external fiscal financing during the
economic slowdown in 2009 and larger disbursement of bilateral loans during 201112.
3.
With greater disbursement of bilateral debt over the past five years, the share of
multilateral creditor debt has continued to decline. The share of bilateral debt, including arrears, in
total external public debt has increased from 50 percent in 2009 to 63 percent in 2012. China remains
the largest bilateral creditor, contributing to more than 50 percent of the total bilateral debt stock and
about 80 percent of bilateral debt disbursement during the past three years. Cambodia remains in
arrears to the Russian Federation and the U.S. (nearly 20 percent of total debt or 6 percent of GDP),
and the status of negotiations of these arrears has remained unchanged since the last DSA. Cambodia
is not servicing its debt with these two creditors. The Cambodian authorities have been in contact with
the Russian and U.S. authorities at least on an annual basis, but further efforts are needed to conclude
agreements under the Paris Club framework. Since prospects for resolution remain unclear, this DSA
continues to assume no debt restructuring, with arrears continuing to build up over the projection
period.
4.
The negligible level of domestic debt remains unchanged. Cambodia has virtually no
domestic public debt at present. There is a small amount of bonds (US$4 million) issued in the early
2000s and some old claims on the government (half percent of GDP, with no interest) that were carried
over from the 1990s and remain to be recorded in the monetary survey.
5.
The authorities have made progress in monitoring their potential contingent liabilities and
strengthening debt management. Consistent with the Debt Management Strategy adopted in 2012,
progress has been made in monitoring potential contingent liabilities, including those related to power
generation and distribution projects under public private partnerships (PPP) that receive government
guarantees. With the support of World Bank technical assistance, the authorities have collected the
contractual agreements of most projects. The latest estimates show that the total investment of all projects
amounted to around $3.2 billion (about 25 percent of GDP in 2012), lower than the previous estimate of
about 50 percent of GDP in 2011. The work on estimating the amount of the payment obligations and the
size of contingent liability has commenced recently. The authorities have also established two departments
within the Ministry of Economy and Finance: (1) an investment department to review and select any new PPP
projects as well as monitor their implementation, and (2) a debt management department to manage the
risks, including those related to contingent liabilities associated with these projects. These two departments
would serve as a central monitoring unit to evaluate and approve new PPP projects, enhance fiscal
transparency, and strengthen information sharing between agencies. The authorities have also been drafting
new laws and regulations on lending and nonlending as well as government guarantees with a view of
adopting a ceiling on government guarantees and listing all contingent liabilities and government guarantees
in annual budget laws.
CAMBODIA
MACROECONOMIC FRAMEWORK
6.
The macroeconomic framework underlying the baseline scenario remains broadly in line
with the previous DSA.
Growth and inflation: Growth has been robust driven by robust garment exports, tourism, and
construction despite
Cambodia: Macroeconomic Framework, 201133
policy uncertainty in
2011
2012 2013 2014 2015 2016 2017 2018 2014-18 2019-23 2024-33
an election year and
Est.
Proj.
Output
and
prices
(percent
change)
recent floods. GDP
GDP growth
7.1
7.3
7.0
7.2
7.3
7.3
7.5
7.5
7.4
7.3
7.0
Consumer prices (end-year)
4.9
2.5
4.1
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
growth is expected at
Public finance (GFSM 2001 presentation, in percent of GDP)
7 percent in 2013 and
Revenue
15.6
16.9 17.1 17.4 18.0 18.2 18.6 18.9
18.2
18.9
19.7
Domestic revenue
12.3
14.1 13.9 14.5 15.0 15.5 16.0 16.5
15.5
17.5
19.1
is projected to
Grants
3.2
2.8
3.2
2.9
2.9
2.7
2.6
2.4
2.7
1.4
0.7
Total expenditure
19.6
20.7 20.1 20.2 19.7 19.3 19.4 19.3
19.6
20.2
21.8
Net
lending
(+)/borrowing(-)
-4.1
-3.8
-3.0
-2.8
-1.7
-1.1
-0.8
-0.4
-1.4
-1.2
-2.1
gradually increase to
Net lending (+)/borrowing(-) excluding grants
-7.3
-6.6
-6.1 -5.7 -4.7 -3.9 -3.4 -2.8
-4.1
-2.6
-2.8
Government deposits
4.6
4.9
4.7
4.7
4.8
4.9
5.2
5.5
5.0
5.5
6.1
7 percent by 2018
Balance of payments (in percent of GDP, unless otherwise indicated)
assuming continued
Current account balance (including transfers)
-8.1
-8.7
-8.6 -8.4 -7.4 -6.6 -6.1 -5.5
-6.8
-6.0
-5.7
Foreign direct investment
11.5
11.3 10.4
8.6
8.1
7.9
7.9
7.4
8.0
7.1
7.2
improvement in
External loans
4.2
4.9
3.9
3.3
2.5
2.2
2.0
1.8
2.4
2.0
1.7
Gross official reserves (in months of next year's imports)
3.6
3.6
3.6
3.7
3.7
3.8
3.9
3.9
3.8
3.9
3.4
infrastructure,
competitiveness and
investment climate3. Over the long term, growth is projected to moderate to 7 percent. Inflation
would stay at 34 percent during 201314 due to stable global food and commodity prices. In the
medium term, it is expected to average 3 percent, in line with the authorities informal target and
partner countries medium-term inflation.
External stability: Despite robust exports and tourism, the current account deficit including
official transfers is expected to stay broadly flat at around 8 percent of GDP in 2013 due to
strong but moderating imports, and it remains fully financed by FDI and official loans. Over the
medium term, the deficit is projected to decline to 5 percent of GDP due to robust export
growth, improved competitiveness and diversification, and lower imports after the completion of
large power generation projects. Gross official reserves are projected to remain at around
3 months of prospective imports. External debt disbursement is projected to average about
US$500 million annually during 201318 (about 2 percent of GDP on average), and with this, the
debt to GDP ratio is projected to gradually decline to 29 percent by 2018.
Fiscal sustainability: Revenue performance has continued to improve and fiscal consolidation
remains broadly on track, although government deposits, the only fiscal buffers in the absence of a
domestic government debt market, remain limited. Domestic revenue is projected to increase by
percent of GDP annually over the medium term in line with the authorities goal under the
Public Financial Management Reform Program. The authorities strong commitment to implement
the Revenue Mobilization Strategy suggests that this goal is achievable. Medium-term fiscal
consolidation is anchored by a rebuilding of government deposits and maintenance of long-term
See Rungcharoenkitkul (2011), IMF Working Paper 12/96.
CAMBODIA
fiscal debt sustainability, while striking a careful balance to provide resources for Cambodias vast
development needs against an expected gradual decline of concessional external funds. In view of
this, domestically-funded capital spending is projected to increase from 1 percent GDP in 2013
to 3 percent in 2018 to cushion the decline in externally-funded capital spending from 6 to
4 percent of GDP, thereby ensuring that the overall capital spending is maintained at least at
7 percent of GDP. With continued efforts to increase efficiency of public investment program and
by keeping the current spending broadly constant in terms of GDP, the fiscal deficit, excluding
grants, is projected to decline gradually from about 6 percent of GDP in 2013 to 2 percent in
2018.
Domestic debt: Different from the last years DSA, Cambodias domestic debt is no longer
assumed to remain zero over the long term. As Cambodia continues to develop, it would start
issuing domestic government bonds to develop its bond market and provide additional fiscal
financing if needed. By issuing net-debt (issuance minus repayment) starting from ppt of GDP
annually in 2021 and gradually increasing to about ppt of GDP in 2033, the total stock of debt
would reach 3 percent of GDP by 2033. This remains low compared to the average domestic
debt in low income countries (LICs) of about 15 percent of GDP. However, this conservative
estimate is in line with the authorities intention of not issuing domestic debt over the medium
term in order to focus more on mobilizing domestic revenue and raising government deposits (i.e.,
savings, not borrowing).
EXTERNAL AND PUBLIC DEBT SUSTAINABILITY

7.
Under the baseline scenario, the external DSA shows that Cambodias risk of debt
distress is low (Figure 1, Tables 1a and 1b). The PV of debt-to-GDP, debt-to-exports, and debt-torevenue ratios are below their respective thresholds and are projected to decline over the 20-year
projection period. Moreover, the debt service-to-exports and debt service-to-revenue ratios are also
expected to decline over time and remain well below the thresholds throughout the projection period,
partly due to the concessionality of debts. Even though the standard stress tests do not indicate any
major vulnerability, the external debt, especially debt-to-revenue ratio, appears to be vulnerable to
exchange rate and export shocks.
8.
The public sector DSA closely tracks the external debt sustainability partly because
public domestic debt is small. (Figure 2 and Tables 2a and 2b). In particular, the PV of public debtto-GDP and the public debt service-to-revenue ratios would decline gradually over time, and the debt
service-to-revenue ratio would remain low in most scenarios for the entire projection period. Different
from last years DSA with a virtually zero domestic debt, the current DSA assumes that domestic debt
will start to increase after 2020 and reach about 3 percent of GDP over the long run.
9.
Public debt sustainability continues to be vulnerable to a lack of fiscal consolidation and
a permanent growth shock. If the primary balance remains unchanged at the 2013 level, the PV of
public debt-to-GDP would continue to increase, reaching about 24 percent in the long run. Under a
permanent growth shock, if real GDP growth is one standard deviation lower than the baseline, the
ratios of public debt-to-GDP and revenue would also continue to increase.
CAMBODIA
10.
Despite the low risk of debt distress, the stock of debt could increase substantially if the
potential contingent liabilities materialize. The total investment in power generation and distribution
projects under PPPs is large, and if for any reason problems arose potentially leading to a total loss of
investment costs, substantial liabilities would be added to the debt stock. For example, if only one in ten
projects fails, an average of 2 percent of GDP (i.e., one tenth of the latest estimate of total investment cost)
could be added to the debt stock. Given network externalities, one failure could trigger additional failures,
further eroding debt sustainability. A more detailed analysis to estimate the size of contingent liabilities with
the support of World Bank technical assistance is still ongoing. One option that is being considered is the
value-at-risk approach, which estimates the maximum probable loss due to the nonpayment of power
purchase or power transmission charges plus the termination sale price of a firm in case of default. Other
potential contingent liabilities include the fiscal cost to support the financial sector during a banking crisis. For
example, the median direct fiscal cost of banking crisis in emerging market economies is estimated at
11.5 percent of GDP.4
11.
The authorities broadly agreed with the overall results of the DSA. The authorities indicated that
the macroeconomic assumptions are broadly consistent with theirs, with medium-and long-term growth
projected at around 7 percent on average. On external debt, the authorities indicated that the actual debt
disbursement over the medium term could be more than US$500 million a year considering prospective new
loans. However, they reiterated their commitment to maintain debt-to-GDP ratio below 30 percent over the
medium term, which is also assumed by this DSA, to ensure debt sustainability over the long run. On
domestic debt, the authorities confirmed that there is no plan for domestic bond issuance until 2018 but
agreed that some domestic debt could be considered over the long term in order to develop the domestic
bond market.
CONCLUSION
12.
Cambodia remains at low risk of debt distress under the baseline scenario. The baseline
projections and the standard stress tests show limited risk to external debt given that none of the
indicators breach their thresholds. The most extreme stress tests indicate that Cambodias debt
sustainability remains vulnerable to shocks to the exchange rate, growth, exports, and fiscal position.
This suggests the importance of preserving macroeconomic stability, diversifying the economy and
exports, and implementing revenue mobilization strategy.
13.
Staff welcomes progress made in strengthening debt management. Prudent debt
management, including monitoring and managing the potential contingent liabilities, is critical to
safeguard the fiscal space. Staff welcomes the authorities progress in collecting more information of
infrastructure projects developed under PPPs and related government guarantees, and looks forward
to the results of the exercise that was recently initiated to estimate the size of contingent liabilities.
Moving forward, staff encourages the authorities to enhance fiscal transparency by adopting a ceiling
on PPP guarantees, and listing all contingent liabilities and government guarantees in annual budget
laws.
4
See for example Laeven and Valencia (2010), IMF Working Paper 10/146.
CAMBODIA
Figure 1. Cambodia: Indicators of Public and Publicly Guaranteed External Debt Under
Alternative Scenarios, 201333 1/
a. Debt accumulation
50
40
35
40
30
25
3
2
30
20
15
10
20
0
2013
160
b. PV of debt-to GDP ratio
45
2018
2023
2027
2033
Rate of debt accumulation
Grant-equivalent financing (% of GDP)
Grant element of new borrowing (% right scale)
c. PV of debt-to-exports ratio
5
0
2013
300
140
2018
2023
2027
2033
d. PV of debt-to-revenue ratio
250
120
200
100
150
80
60
100
40
50
20
0
2013
25
2018
2023
2027
2013
2033
e. Debt service-to-exports ratio
25
20
20
15
15
10
10
2018
2023
2027
f. Debt service-to-revenue ratio
0
2013
2018
Baseline
2023
2027
2033
Historical scenario
2013
2018
2023
Most extreme shock 1/
2027
1/ The most extreme stress test is the test that yields the highest ratio in 2023. In figure b. it corresponds to a onetime depreciation shock; in c. to an exports shock; in d. to a one-time depreciation shock; in e. to an exports shock
and in figure f. to an exports shock.
2033
Threshold
2033
CAMBODIA
Figure 2. Cambodia: Indicators of Public Debt Under Alternative Scenarios, 201333 1/

Baseline
Fixed primary balance
Most extreme shock
Historical scenario
30
PV of debt-to-GDP ratio
25
20
15
10
0
2013
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
2021
2023
2025
2027
2029
2031
2033
2021
2023
2025
2027
2029
2031
2033
140
PV of debt-to-revenue ratio 2/
120
100
80
60
40
20
0
2013
2015
2017
2019
20
18
Debt service-to-revenue ratio 2/
16
14
12
10
8
6
4
2
0
2013
2015
2017
2019

1/ The most extreme stress test is the test that yields the highest ratio in all figures, this corresponds to a permanent
growth shock in 2023.
2/ Revenues are defined inclusive of grants.
(In percent of GDP, unless otherwise indicated)

Actual
External debt (nominal) 1/

Of which: Public and publicly guaranteed (PPG)
Change in external debt
Identified net debt-creating flows
Noninterest current account deficit
Deficit in balance of goods and services
Exports
Imports
Net current transfers (negative = inflow)
Of which: Official
Other current account flows (negative = net inflow)
Net FDI (negative = inflow)
Endogenous debt dynamics 3/
Contribution from nominal interest rate
Contribution from real GDP growth
Contribution from price and exchange rate changes
Residual (3-4) 4/
Of which: Exceptional financing
PV of external debt 5/
In percent of exports
PV of PPG external debt
In percent of exports
In percent of government revenues
Debt service-to-exports ratio (in percent)
PPG debt service-to-exports ratio (in percent)
PPG debt service-to-revenue ratio (in percent)
Total gross financing need (billions of U.S. dollars)
Noninterest current account deficit that stabilizes debt ratio
Projections
2010
2011
2012
28.7
28.7
0.3
-5.0
3.6
7.9
49.3
57.2
-8.6
-6.8
4.4
-6.8
-1.8
0.3
-1.6
-0.5
5.3
-0.2
29.7
29.7
1.0
-7.1
7.8
8.9
57.7
66.6
-6.3
-3.8
5.1
-11.5
-3.4
0.3
-1.8
-1.9
8.1
-0.1
31.6
31.6
1.9
-5.2
8.4
8.9
61.8
70.6
-5.4
-3.4
4.9
-11.3
-2.3
0.3
-2.0
-0.6
7.0
-0.1
...
...
...
...
...
1.4
1.4
5.2
-0.3
3.3
...
...
...
...
...
1.2
1.2
5.2
-0.4
6.7
19.0
30.8
19.0
30.8
125.4
1.0
1.0
4.2
-0.3
6.6
6.1
1.9
1.1
22.8
19.2
...
13.1
0.8
0.6
0.2
...
...
7.1
7.0
1.2
33.8
33.3
...
13.1
0.7
0.4
0.3
...
...
7.3
2.1
1.1
17.3
16.2
...
15.2
0.7
0.4
0.3
...
...
11.3
8.1
12.9
14.5
14.1
9.5
2.7
Historical
Average 2/
Standard
Deviation 2/
4.0
2.6
-8.6
1.7
-6.9
3.4
2013
2014
2015
2016
2017
2018
32.8
32.8
1.2
-3.8
8.3
9.0
64.8
73.8
-5.1
-3.1
4.3
-10.4
-1.6
0.4
-2.0
5.0
-0.1
33.1
33.1
0.2
-2.3
8.0
8.6
67.5
76.1
-4.8
-2.8
4.2
-8.6
-1.7
0.5
-2.2
2.6
-0.1
32.3
32.3
-0.7
-2.9
7.0
7.4
69.0
76.4
-4.6
-2.6
4.2
-8.1
-1.8
0.4
-2.2
2.2
-0.1
31.4
31.4
-0.9
-3.4
6.1
6.7
70.1
76.8
-4.4
-2.4
3.7
-7.9
-1.6
0.6
-2.2
2.5
-0.1
30.1
30.1
-1.3
-4.0
5.7
6.4
71.0
77.4
-4.1
-2.1
3.4
-7.9
-1.8
0.4
-2.2
2.7
-0.1
28.8
28.8
-1.3
-3.9
5.3
6.3
71.6
77.8
-4.0
-2.0
3.0
-7.4
-1.8
0.2
-2.1
2.6
0.0
19.7
30.4
19.7
30.4
135.9
1.1
1.1
5.1
-0.2
7.0
19.7
29.2
19.7
29.2
130.9
1.3
1.3
5.7
0.0
7.7
19.3
27.9
19.3
27.9
123.5
1.3
1.3
5.6
0.0
7.7
18.5
26.4
18.5
26.4
115.3
1.5
1.5
6.6
-0.2
7.0
17.7
24.9
17.7
24.9
106.7
1.5
1.5
6.2
-0.2
7.0
17.0
23.8
17.0
23.8
99.7
1.2
1.2
5.2
-0.3
6.6
7.0
2.8
1.3
15.4
14.9
45.8
14.5
0.9
0.5
0.4
5.0
70.1
7.2
1.6
1.6
13.6
12.5
46.6
15.1
0.8
0.5
0.3
4.4
71.6
7.3
1.8
1.4
11.7
9.7
47.2
15.6
0.8
0.5
0.3
4.1
75.7
7.3
1.8
1.9
10.9
9.8
46.8
16.1
0.8
0.5
0.3
3.7
76.0
7.5
1.7
1.3
10.8
10.2
46.6
16.6
0.9
0.6
0.3
3.5
76.6
7.5
1.8
0.9
10.3
10.0
45.7
17.1
0.9
0.6
0.3
3.2
76.3
15.5
10.0
3.0
2.4
0.3
19.3
29.5
1.1
16.9
9.0
3.3
1.8
0.3
19.3
28.4
1.2
18.5
9.3
3.5
1.3
0.4
18.9
27.1
1.2
20.2
9.2
3.7
1.0
0.4
18.2
25.7
1.5
22.1
9.4
3.9
0.9
0.4
17.4
24.3
1.4
24.2
9.4
4.1
0.9
0.5
16.7
23.1
1.2
201318
Average
6.7
-4.5
-8.4
2023
2033
25.0
25.0
-0.6
-2.6
5.9
6.0
75.0
81.0
-2.7
-0.7
2.6
-7.1
-1.4
0.3
-1.7
2.0
0.0
19.0
19.0
-0.5
-3.3
4.9
4.4
88.5
92.8
-2.3
-0.3
2.8
-7.2
-1.0
0.2
-1.2
2.9
0.0
14.9
19.9
14.9
19.9
80.3
1.1
1.1
4.4
-0.1
6.5
11.7
13.2
11.7
13.2
57.0
0.8
0.8
3.5
-1.4
5.3
7.1
1.7
1.2
10.4
10.1
44.0
18.6
0.8
0.4
0.4
1.8
62.2
7.0
1.8
1.3
10.8
10.5
42.4
20.6
1.1
0.4
0.7
1.2
56.4
37.3
8.9
5.5
1.0
0.7
14.6
19.4
1.1
87.5
8.9
10.2
0.8
0.0
11.7
13.2
0.8
201933
Average
5.6
-2.7
-7.1
Key macroeconomic assumptions

Real GDP growth (in percent)
GDP deflator in U.S. dollar terms (change in percent)
Effective interest rate (percent) 6/
Growth of exports of G&S (U.S. dollar terms, in percent)
Growth of imports of G&S (U.S. dollar terms, in percent)
Grant element of new public sector borrowing (in percent)
Government revenues (excluding grants, in percent of GDP)
Aid flows (in billions of U.S. dollars) 7/
Of which: Grants
Of which: Concessional loans
Grant-equivalent financing (in percent of GDP) 8/
Grant-equivalent financing (in percent of external financing) 8/
Memorandum items:
Nominal GDP (billions of U.S. dollars)
Nominal dollar GDP growth
PV of PPG external debt (in billions of U.S. dollars)
(PVt-PVt-1)/GDPt-1 (in percent)
Gross workers' remittances (billions of U.S. dollars)
PV of PPG external debt (in percent of GDP + remittances)
PV of PPG external debt (in percent of exports + remittances)
Debt service of PPG external debt (in percent of exports + remittances)
0.2
...
...
...
0.3
...
...
...
0.3
18.6
29.8
1.0
8.0
4.4
1.1
14.7
14.5
...
3.6
3.7
0.1
14.3
12.5
...

1/ Includes both public and private sector external debt.
2/ Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.
3/ Derived as [r - g - (1+g)]/(1+g++g) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and = growth rate of GDP deflator in U.S. dollar terms.
4/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes.
5/ Assumes that PV of private sector debt is equivalent to its face value.
6/ Current-year interest payments divided by previous period debt stock.
7/ Defined as grants, concessional loans, and debt relief.
8/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).
7.3
1.9
1.4
12.1
11.2
46.5
9.4
1.4
7.1
1.7
1.2
10.5
10.2
43.7
19.1
1.7
62.2
9.0
0.9
CAMBODIA
8
Table 1a. Cambodia: External Debt Sustainability Framework, Baseline Scenario, 201033 1/
Table 1b. Cambodia: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 201333
(In percent)
Projections
2016 2017
2013
2014
2015
2018
2023
2033
20
20
19
19
18
17
15
12
20
20
18
20
16
21
14
20
13
20
12
20
6
19
2
18
20
20
20
20
20
20
20
24
20
21
22
28
20
31
20
22
25
27
19
30
19
21
24
26
19
29
18
20
23
25
18
28
17
19
22
24
16
23
15
17
18
21
12
14
12
12
13
17
30
29
28
26
25
24
20
13
30
30
26
30
23
30
20
29
18
28
16
28
8
26
2
20
30
30
30
30
30
30
29
40
29
32
34
29
28
57
28
32
39
28
26
54
26
30
37
26
25
51
25
29
35
25
24
48
24
27
33
24
20
38
20
22
27
20
13
20
13
14
16
13
136
131
123
115
107
100
80
57
136
136
118
136
102
132
89
127
78
121
69
116
33
104
8
87
136
136
136
136
136
136
134
160
131
142
146
185
129
202
125
142
159
174
121
188
117
132
148
163
112
173
108
122
137
151
105
161
101
114
128
141
84
122
82
90
99
113
60
69
58
59
62
80
PV of debt-to GDP ratio

Baseline
A. Alternative Scenarios
A1. Key variables at their historical averages in 201333 1/
A2. New public sector loans on less favorable terms in 201333 /2
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 201415
B2. Export value growth at historical average minus one standard deviation in 201415 3/
B3. U.S. dollar GDP deflator at historical average minus one standard deviation in 201415
B4. Net nondebt creating flows at historical average minus one standard deviation in 201415 4/
B5. Combination of B1-B4 using one-half standard deviation shocks
B6. One-time 30 percent nominal depreciation relative to the baseline in 2014 5/
PV of debt-to-exports ratio
Baseline

B. Bound Tests
PV of debt-to-revenue ratio
B. Bound Tests
CAMBODIA
Baseline
CAMBODIA
10
Table 1b. Cambodia: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 201333 (concluded)
(In percent)
Projections
2016 2017
2013
2014
2015
2018
2023
2033
1
1
1
1
1
1
1
2
1
2
1
1
1
1
0
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
1
1
1
1
2
2
2
2
2
2
1
2
1
2
2
1
1
2
1
1
2
1
1
2
1
1
2
1
1
1
1
1
1
1
5
5
6
6
5
6
6
7
5
7
4
6
2
6
1
5
5
5
5
5
5
5
6
6
6
6
6
8
6
6
6
6
6
8
7
8
7
7
7
9
7
8
6
7
7
9
5
6
5
5
6
7
5
8
4
5
6
6
4
5
4
4
4
5
43
43
43
43
43
43
43
43
Debt service-to-exports ratio

Baseline
B. Bound Tests
Debt service-to-revenue ratio

Baseline
B. Bound Tests
Memorandum item:
Grant element assumed on residual financing (i.e., financing required above baseline) 6/
1/ Variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), noninterest current account in percent of GDP, and nondebt creating flows.
2/ Assumes that the interest rate on new borrowing is by 2 percentage points higher than in the baseline., while grace and maturity periods are the same as in the baseline.
3/ Exports values are assumed to remain permanently at the lower level, but the current account as a share of GDP is assumed to return to its baseline level after
the shock (implicitly assuming an offsetting adjustment in import levels).
4/ Includes official and private transfers and FDI.
5/ Depreciation is defined as percentage decline in dollar/local currency rate, such that it never exceeds 100 percent.
6/ Applies to all stress scenarios except for A2 (less favorable financing) in which the terms on all new financing are as specified in footnote 2.
Table 2a. Cambodia: Public Sector Debt Sustainability Framework, Baseline Scenario, 201033
(In percent of GDP, unless otherwise indicated)
Actual
Estimate
Standard
2010
2011
2012
Average 1/
Deviation 1/
2013
2014
2015
2016
2017
Projections
201318
2018 Average
201933
2023
2033
Average
Public sector debt 2/

Of which: Foreign-currency denominated
29.3
28.7
30.3
29.7
32.1
31.6
33.3
32.8
33.5
33.1
32.7
32.3
31.8
31.4
30.4
30.1
29.1
28.8
25.9
25.0
22.5
19.0
Change in public sector debt

Identified debt-creating flows
Primary deficit
Revenue and grants
Of which: Grants
0.2
-0.6
2.3
18.0
4.9
20.3
-2.9
-1.7
0.0
-1.7
-1.2
0.0
0.0
0.0
0.0
0.0
0.8
1.0
1.4
4.0
16.3
3.2
20.3
-2.6
-2.0
0.0
-1.9
-0.7
0.0
0.0
0.0
0.0
0.0
-0.4
1.8
0.8
3.2
17.9
2.8
21.2
-2.4
-2.1
-0.1
-2.1
-0.3
0.0
0.0
0.0
0.0
0.0
1.0
1.2
0.5
2.7
17.7
3.2
20.3
-2.1
-2.2
-0.1
-2.1
0.1
0.0
0.0
0.0
0.0
0.0
0.6
0.2
-0.2
2.1
18.0
2.9
20.0
-2.3
-2.3
-0.1
-2.2
0.0
0.0
0.0
0.0
0.0
0.0
0.5
-0.7
-1.2
1.2
18.5
2.9
19.7
-2.4
-2.4
-0.1
-2.3
0.0
0.0
0.0
0.0
0.0
0.0
0.5
-1.0
-1.7
0.5
18.8
2.7
19.2
-2.2
-2.3
0.0
-2.2
0.1
0.0
0.0
0.0
0.0
0.0
0.8
-1.3
-2.1
0.3
19.2
2.6
19.5
-2.4
-2.4
-0.2
-2.2
0.1
0.0
0.0
0.0
0.0
0.0
0.7
-1.4
-2.3
0.1
19.5
2.4
19.6
-2.4
-2.4
-0.3
-2.1
0.0
0.0
0.0
0.0
0.0
0.0
0.9
-0.4
-0.4
1.5
19.5
1.0
21.0
-1.9
-1.9
-0.2
-1.7
...
0.0
0.0
0.0
0.0
0.0
0.0
-0.1
0.6
2.2
21.1
0.5
23.3
-1.6
-1.6
-0.1
-1.5
...
0.0
0.0
0.0
0.0
0.0
-0.6
Debt service-to-revenue and grants ratio (in percent) 5/

Debt service-to-revenue ratio (in percent) 5/
Primary deficit that stabilizes the debt-to-GDP ratio
...
...
...
...
3.5
3.8
5.2
2.1
...
...
...
...
5.2
4.2
5.2
3.0
19.5
19.0
19.0
...
4.4
108.9
128.8
125.4
3.8
4.4
1.4
20.2
19.7
19.7
...
3.8
114.1
139.1
135.9
4.2
5.1
1.5
20.1
19.7
19.7
...
3.3
112.2
133.7
130.9
4.8
5.8
1.9
19.6
19.3
19.3
...
2.4
106.0
126.0
123.5
4.7
5.6
1.9
18.9
18.5
18.5
...
1.9
100.5
117.5
115.3
5.8
6.8
1.4
18.0
17.7
17.7
...
1.6
93.9
108.6
106.7
5.4
6.2
1.6
17.3
17.0
17.0
...
1.2
88.8
101.3
99.7
4.5
5.2
1.5
15.9
14.9
14.9
...
2.5
81.3
85.6
80.3
4.3
4.5
1.8
15.2
11.7
11.7
...
3.0
72.2
74.0
57.0
3.8
3.9
2.2
Key macroeconomic and fiscal assumptions

Real GDP growth (in percent)
6.1
7.1
7.3
8.0
3.6
7.0
7.2
7.3
7.3
7.5
7.5
7.3
7.1
7.0
7.1
1.1
-2.7
-4.5
3.0
0.1
...
1.2
-3.1
-2.5
3.4
0.1
...
1.1
-1.1
-1.0
1.3
0.1
...
1.1
-4.1
-2.8
4.6
0.1
0.1
2.8
2.5
3.2
0.1
1.3
-2.8
0.2
3.1
0.0
45.8
1.6
-2.8
...
3.1
0.1
46.6
1.4
-2.8
...
3.1
0.1
47.2
1.9
-2.7
...
3.0
0.0
46.8
1.3
-2.6
...
2.9
0.1
46.6
0.9
-2.5
...
2.8
0.1
45.7
1.4
-2.7
...
3.0
0.1
46.5
1.2
-0.3
...
2.6
0.1
44.0
1.3
0.2
...
2.8
0.1
42.4
1.2
-0.4
...
2.7
0.1
...
Primary (noninterest) expenditure

Automatic debt dynamics
Contribution from interest rate/growth differential
Of which: Contribution from average real interest rate
Of which: Contribution from real GDP growth
Other Sustainability Indicators

PV of public sector debt
Of which: Foreign-currency denominated
Of which: External
PV of contingent liabilities (not included in public sector debt)
Gross financing need 3/
PV of public sector debt-to-revenue and grants ratio (in percent)
PV of public sector debt-to-revenue ratio (in percent)
Of which: External 4/
1.1
1.5

1/ Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.
2/ The public sector debt represents general government gross debt.
3/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period.
4/ Revenues excluding grants.
5/ Debt service is defined as the sum of interest and amortization of medium and long-term debt.
CAMBODIA
Average nominal interest rate on forex debt (in percent)

Average real interest rate on domestic debt (in percent)
Real exchange rate depreciation (in percent, + indicates depreciation)
Inflation rate (GDP deflator, in percent)
Growth of real primary spending (deflated by GDP deflator, in percent)
Grant element of new external borrowing (in percent)
1.9
11
Contribution from real exchange rate depreciation

Other identified debt-creating flows
Privatization receipts (negative)
Recognition of implicit or contingent liabilities
Debt relief (HIPC and other)
Other (specify, e.g., bank recapitalization)
Residual, including asset changes
1.9
11
12
CAMBODIA
Table 2b. Cambodia: Sensitivity Analysis for Key Indicators of Public Debt, 201333
(In percent)
Projections
2016
2017
2013
2014
2015
2018
2023
2033
20
20
20
19
18
17
16
15
20
20
20
20
20
20
20
21
20
20
21
20
19
21
19
20
22
19
20
24
21
17
24
31
21
21
21
28
26
21
22
21
26
25
21
21
21
25
24
21
20
20
23
23
20
19
19
22
22
21
17
18
18
19
23
16
18
15
17
112
106
101
94
89
81
72
PV of debt-to-GDP ratio
Baseline
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages
A2. Primary balance is unchanged from 2013
A3. Permanently lower GDP growth 1/
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 201415
20
B2. Primary balance is at historical average minus one standard deviations in 201415
20
B3. Combination of B1-B2 using one half standard deviation shocks
20
B4. One-time 30 percent real depreciation in 2014
20
B5. 10 percent of GDP increase in other debt-creating flows in 2014
20
PV of debt-to-revenue ratio 2/
Baseline
114
114
114
114
111
114
113
106
112
108
105
113
104
102
112
100
101
113
97
101
123
106
79
112
148
B. Bound tests
114
114
114
114
114
116
117
115
154
143
115
119
115
141
135
111
112
110
131
127
107
105
103
120
119
103
99
99
111
112
107
89
94
91
99
110
76
87
73
81
Debt service-to-revenue ratio 2/

Baseline
4
4
4
5
5
5
5
5
5
6
6
6
5
6
6
5
5
5
5
5
5
4
6
6
4
4
4
4
4
5
5
5
6
5
5
5
5
7
5
6
6
6
8
7
6
6
6
8
6
5
5
5
7
5
5
5
5
6
6
5
4
5
6
4
B. Bound tests

1/ Assumes that real GDP growth is at baseline minus one standard deviation divided by the square root of the length of the projection period.
2/ Revenues are defined inclusive of grants.
CAMBODIA
STAFF REPORT FOR THE 2013 ARTICLE IV
January 9, 2014
CONSULTATIONINFORMATIONAL ANNEX
Prepared By
Asia and Pacific Department

(In consultation with other departments)
CONTENTS
FUND RELATIONS ________________________________________________________________________2
IMF-WORLD BANK COLLABORATION___________________________________________________4
RELATIONS WITH THE ASIAN DEVELOPMENT BANK __________________________________7
STATISTICAL ISSUES____________________________________________________________________ 10
MAIN WEBSITES OF DATA _____________________________________________________________ 13
CAMBODIA
FUND RELATIONS
(As of November 30, 2013)
Membership Status
Joined December 31, 1969; accepted the obligations under Article VIII, Sections 2, 3, and 4 on January 1,
2002.
General Resources Account:
Quota
SDR Million
Percent Quota
87.50
100.00
87.50
0.00
100.00
0.00
SDR Million
Percent Allocation
83.92
68.36
100.00
81.46
Fund holdings of currency (Exchange Rate)

Reserve Tranche Position
SDR Department:
Net cumulative allocation
Holdings
Outstanding Purchases and Loans: None
Latest Financial Arrangements:
Type
ECF 1/
ECF 1/
1/
Date of Arrangement
Oct. 22, 1999
May 06, 1994
Expiration Date
Mar. 05, 2003
Aug. 31, 1997
Amount Approved
(SDR Million)
58.50
84.00
Amount Drawn
(SDR Million)
58.50
42.00
Formerly PRGF
Projected Payments to the Fund 2/

(SDR Million; based on existing use of resources and present holdings of SDRs):
Principal
Charges/Interest
Total
2013
2014
0.00
0.00
0.02
0.02
Forthcoming
2015
0.02
0.02
2016
2017
0.02
0.02
0.02
0.02
2/
When a member has overdue financial obligations outstanding for more than three months, the amount of such
arrears will be shown in this section.
Multilateral Debt Relief Initiative

As part of the Multilateral Debt Relief Initiative (MDRI), the IMF Executive Board on January 5, 2006
approved relief on 100 percent of debt incurred by Cambodia to the IMF before January 1, 2005. This
resulted in the forgiving of all of Cambodias outstanding debt to the IMF, a total of SDR 56.8 million
CAMBODIA
(about US$82 million). The authorities intend to spend the resources over a number of years, initially on
rural irrigation projects. The National Bank of Cambodia (NBC) transferred the full MDRI proceeds to the
Ministry of Economy and Finance effective March 2006.
Safeguards Assessment
A voluntary safeguards assessment of the NBC was completed in January 2010 at the request of the
authorities, which updated the previous March 2004 voluntary assessment. The update assessment
found that the NBC had taken steps to strengthen aspects of its safeguards framework; however,
important recommendations proposed in 2004 were still outstanding, and some new risks had emerged
in the area of external audit.
Exchange Rate Arrangement and Payments System
Cambodias exchange regime is classified as other managed. The de jure regime is a managed float. The
official exchange rate, which is expressed in riels per U.S. dollar, applies to all official external
transactions conducted by the central government and state enterprises, and is used for accounting
purposes by the NBC. It is determined by the foreign exchange market, with the official rate adjusted to
be within 1 percent of the market rate on a daily basis.
Cambodia accepted the obligations of Article VIII, Sections 2, 3, and 4 on January 1, 2002. Cambodia
maintains an exchange system that is free of restrictions on the making of payments and transfers
for current international transactions.
Article IV Consultation
Cambodia is on the standard 12-month Article IV consultation cycle. The last Article IV consultation
discussions were held in Phnom Penh during September 25-October 5, 2012. The Executive Board
approved the staff report on December 3, 2012.
Financial Sector Assessment Program (FSAP)
The joint IMF-World Bank FSAP mission took place in March 2010 and the assessment was
completed in October 2010.
Technical Assistance
Technical assistance is currently focused on bank supervision, monetary operations, public financial
management, tax and customs administration, tax policies, macro-fiscal and revenue forecasting,
financial sector supervision, and macro-financial statistics. Delivery is through a resident advisor at
the NBC, peripatetic experts, and short-term visits from headquarters.
Resident Representative
The IMF Resident Representative in Phnom Penh (Mr. Faisal Ahmed) was appointed in July 2011.
From July 2010 to June 2011, the IMFs Resident Representative for Indonesia (Mr. Milan Zavadjil)
also assumed the responsibilities for the IMF office in Cambodia.
CAMBODIA
IMF-WORLD BANK COLLABORATION

(October 2013)
The Bank and the IMF country teams for Cambodia, led by Mr. Mathew Verghis (Sector
Manager, EASPR) and Ms. Meral Karasulu (IMF Mission Chief for Cambodia), maintain a close
working relationship and have an active dialogue on a range of macroeconomic and structural
issues.
Recent key areas of cooperation and coordination include:
Macroeconomic policy advice to the authorities. The IMF and the World Bank staffs have
consulted each other on key macroeconomic policy messages to the authorities to avoid
sending conflicting messages. Bank staff share and discuss the review of macroeconomic
developments and country pages. IMF staff share policy notes and analytical background notes
related to Article IV consultation missions.
Financial sector reform and FSAP. The World Bank and the IMF teams have worked closely
together while undertaking the 2010 FSAP. In line with the FSAP recommendations, technical
assistance missions are now ongoing and close coordination between the IMF and the World
Bank continues.
Public financial management and tax and customs administration reform. Both institutions
are working to strengthen coordination of work on public financial management including tax
and customs administration reform. Both teams share as much as possible the work done in this
area. Both teams also worked closely together on customs modernization and reform.
Article IV consultations. IMF Article IV consultations regularly share their macroeconomic data
with the World Bank and hold working sessions to try and reconcile macroeconomic data sets.
The collaboration is closest on the debt sustainability analysis, a joint product, but extends more
broadly into other areas of the consultation as well. World Bank staff are also invited to and do
participate in some of the key meetings. The IMF also participated in some of the WB TA
missions on contingent liabilities. Both institutions are considering using the TA mission findings
to further strengthen the DSA analysis.
Structural reforms. The IMF staff and the World Bank teams have worked together to share
views on a range of other issues, including structural reforms for improving investment climate,
economic diversification, customs modernization, and rural development.
Based on the above partnership, the World Bank and the IMF share a common view about
Cambodias macroeconomic and structural reform priorities. These include:
Sustaining growth. Economic activity remains strong despite some moderation in recent
months and the outlook remains broadly positive but is subject to some downside risks,
CAMBODIA
including prolonged political stalemate. Sustaining growth would require appropriate fiscal
consolidation and prudent management of the banking sector risks. Improving the business
climate, reducing infrastructure and skills bottlenecks, promoting private sector development
and economic diversification, improving governance and the delivery of public services and
supporting rural development continue to be essential to promote self-sustaining and inclusive
growth.
Managing public finances and debt. Fiscal policy remains the main instrument for
macroeconomic management given high dollarization. Prudent fiscal management is, therefore,
critical and needs to be underpinned by improved revenue collection, prioritized spending, and
better monitoring of contingent liabilities, including through the budgetary and public debt
management framework and further progress in budgetary transparency.
Safeguarding financial system stability and improving the effectiveness of monetary

policy. Implementing the key recommendations of the 2010 FSAP remains critical to
safeguarding financial stability. These include implementing a moratorium on new bank licenses,
strengthening coordinated supervision, developing the foreign exchange market, and improving
the supervisory capacity. Financial stability risks from the buoyant real estate markets need to be
managed through strengthened supervision and improved data collection. Developing an
interbank market remains a necessary step for a transition to more effective and market based
monetary policy operations.
Improving governance. Both the World Bank and IMF have stressed the critical role of
governance in improving the quality of service delivery and fostering private sector
development, which is the engine of growth.
The teams are committed to continue the close cooperation going forward. The table below
details the specific activities planned by the two country teams over the next 12-month period along
with their expected deliveries.
CAMBODIA
Cambodia: Joint Managerial Action Plan, 201314

Provisional and
Title
Products
Actual Timing
Expected and Actual

Delivery Date
of Missions
A. MUTUAL INFORMATION ON RELEVANT WORK PROGRAMS

The World Banks
Macroeconomic monitoring
Work program in the
Semi-annual updates
Ongoing
tentatively in April and Oct
Once every six months:
next 12 Months
Cambodia Economic update
2014
Financial sector
FSAP follow-up technical assistance to improve
Ongoing
Two or three missions a year.
Ongoing
PFMAP closes in Nov 2013
accounting and auditing practices for financial

institutions. FSAP follow-up technical assistance on crisis
preparedness and crisis management framework.
FSAP follow-up technical assistance on regulatory
framework.
Public sector management
Public Financial Management Reform Program (PFMRP)
Public administration reform (PAR) potential support
New PFMMP to be established
envisioned.
before the end of 2013
Trade
Trade Development Support Program
On going
Connectivity
Customs modernization and reform
The IMFs Work
Macroeconomic policy analysis and advice
Program in the next

12 Months
rd
2014 Article IV consultation
3 Quarter 2014
Policy notes on request
Ongoing
Technical assistance
Ongoing
December 2014
Fiscal sector: Cash management, government

accounting, budget classification, tax policy, tax
administration, macro-fiscal capacity building, PFM
regional advisor and advisor to the National Treasury
Financial sector: FSAP follow-up work, resident banking
supervision advisor, consolidated supervision, foreign
exchange market, liquidity management, data
improvement
Statistics: National accounts, price, balance of payments
B. AGREEMENT ON JOINT PRODUCTS AND MISSIONS

Joint Products in the
Debt sustainability analysis
next 12 Months
2014 Article IV
During Article IV
consultations
consultations
CAMBODIA
RELATIONS WITH THE ASIAN DEVELOPMENT BANK

(October 2013)
From 1992 through September 2013, the Asian Development Bank (AsDB) approved funding of
US$1,827.97 million including 70 loan projects and programs of US$1,572.26 million with low
interest, and 21 Asian Development Fund (ADF) grants of US$255.71 million to Cambodia for
structural reform programs and development projects. To date, 46 loan projects for a total of
US$964.94 million and 10 ADF grants of US$85.51 million have been completed.
The sector composition of the active loan/grant portfolio of US$ 819.92 as of September 2013 is:
(i) agriculture and natural resources, US$245.5 million; (ii) education, US$81.6 million; (iii) energy,
US$65.0 million; (iv) finance, US$15.0; (v) health, nutrition, and social protection, US$10.0 million;
(vi) industry and trade, US$11.0 million; (vii) multi-sector (flood reconstruction), US$55.0 million;
(viii) public sector management, US$78.56 million; (ix) transport and communication,
US$200.26 million; and (x) water supply, sanitation, and waste management, US$28.0 million.
ADB Cambodia Country Partnership Strategy (CPS), 20112013, endorsed by the Board on 5 July
2011, supports the Governments development priorities and is aligned closely with the core
operational areas and drivers of change of ADBs Strategy 2020. It aims to reduce poverty through
projects and programs to promote inclusive economic growth and social development and equity.
The CPS continues a geographical focus on the Tonle Sap Basin, one of the poorest, most
environmentally sensitive regions of Cambodia, and strengthens integration of Cambodia into the
Greater Mekong Subregion (GMS).
The 20112013 CPS focuses on five priority sectorstransport (rural and provincial roads), water
supply, sanitation and urban development, agriculture and natural resources (agriculture
commercialization and irrigation support), education (lower secondary schools and vocational
training), and finance (banking regulation, SME finance, and microfinance), supported by ongoing
activities in public sector management (public financial management, and deconcentration and
decentralization). The program responds to the country challenges of climate change,
decentralization, rural-urban linkages, and regional cooperation. The program also incorporates five
key cross-cutting themes into all activitiesprivate sector development, governance, gender equity,
knowledge solutions, and partnerships.
The 3-year time period for the CPS was determined jointly with the Government to align with
Cambodias strategic planning cycle, and has been characterized by Government officials as of great
importance for the evolution of the Cambodian economy. Given this development context and the
relatively short three-year planning horizon, the CPS implements a realistic, focused and aligned
strategy, consistent with emerging government priorities. The CPS supports the Government with
the preparation of the National Strategic Development Plan 20142018 through analytical sector
and thematic support. This work will also support the preparation of the CPS 20142018, for Board
endorsement in June 2014.
CAMBODIA
In finance, the AsDB will continue its leading role in the financial sector to: (i) consolidate the
banking sector reforms achieved to date, improve financial infrastructure including the national
clearing system and the credit information center covering both banks and microfinance institutions,
and support the strengthening of supervision capacity of the National Bank of Cambodia including
AML/CFT measures; (ii) expand the insurance business for life insurance; and (iii) facilitate capital
market development for more efficient domestic resource mobilization. The AsDB supports
implementation of the Financial Sector Development Strategy (20112020). The CPS also includes
support for government measures to deepen public sector management reform and strengthen
anticorruption measures. For decentralization, the AsDB is supporting policy and capacity
development in the transfer of functions to sub-national administrations, fiscal decentralization
(including public financial management capacity development), and sub-national financing
mechanisms such as the Sub-National Investment Facility. Regarding public financial management,
AsDB has supported budget preparation and execution, financial management, internal control,
procurement, and M&E to improve accountability in public expenditures for selected ministries1 as
well as the public debt management capacity of MEF. AsDB has also supported the external audit
capacity of the National Audit Authority.
In private sector development, the AsDB has assisted the governments efforts in: (i) promoting
competition in domestic markets through competition policy and law, and regulatory efficiency
through capacity development to institutionalize regulatory impact assessment system in the
government; (ii) supporting trade policy reforms such as through strengthening of institutional and
regulatory framework for effective food safety management systems, and capacity and awareness of
the systems; and (iii) enhancing the environment for public-private partnership and stimulating PPP
opportunities. Assistance has also been provided to help the government improve its
competitiveness at the GMS level through reducing border-related costs and distortions; improving
physical infrastructure; enhancing transport and trade facilitation, including promoting compliance
with SPS standards. Later interventions would be more focused on improving the trade facilitation
and logistical links to the sub-region as systems and procedures become more developed and
integrated.
Ministry of Agriculture, Forestry and Fisheries; Ministry of Rural Development; and Ministry of Water Resources and
Meteorology.
CAMBODIA
Asian Development Bank: Loan/Grant Commitments and

Disbursements to Cambodia, 19922013
(In millions of U.S. dollars, as of September 30, 2013)
Loan/Grant
Approvals
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
20051
20062
20073
20084
20095
20106
20117
2012 8
2013 9
TOTAL:
67.7
0.0
28.2
45.1
105.0
0.0
40.0
88.0
109.6
75.2
116.5
98.3
65.0
52.0
69.8
64.1
84.1
144.5
160.8
70.0
316.91
111.5
1,912.3
Contract Awards/
Commitment
Disbursements
0.0
4.4
35.9
28.1
15.3
41.5
29.1
17.0
114.4
40.7
64.4
61.9
62.4
96.4
44.7
85.8
128.3
62.3
66.0
143.8
142.5
144.3
1,429.2
0.0
5.4
12.2
35.9
32.1
10.7
29.3
26.2
50.8
48.3
78.9
73.3
76.7
84.5
55.8
62.1
138.9
84.6
73.5
128.6
94.5
136.5
1,343.6
US$10 million loans and US$42 million grants approved in 2005.
US$62 million loans and US$7.8 million grants approved in 2006.
US$27.1 million loans and US$37 million grants approved in 2007.
US$53.8 million loans and US$30.3 million grants approved in 2008.
9 US$70 million loans and $25.21 million loans approved in 2013. As of 30 September 2013,
actual contract awards and disbursements are $111.81 and 136.49 million respectively.
CAMBODIA
STATISTICAL ISSUES
(November 2013)
Assessment of Data Adequacy for Surveillance
General. Data provision is broadly adequate for surveillance. Extensive technical assistance (TA) has
been provided by the IMF, United Nations Development Programme, Asian Development Bank
(AsDB), and World Bank, as well as by bilateral partners, leading to substantial capacity
improvements. Currently, Cambodia is participating in Statistics Departments (STA's) project on the
Implementation of the System of National Accounts and International Comparison Program, funded
by the government of Japan. This project will provide TA to build statistical capacity and improve
both national accounts and price statistics. Despite the progress made in improving data statistics,
several shortcomings continue to hamper timely and comprehensive analysis.
National accounts. Despite improvements in recent years, weaknesses remain in the quality and
timeliness of national accounts data. The GDP estimates remain hampered by the lack of
comprehensive and reliable source data, in part due to resource constraints and weak data collection
techniques. Statistics Sweden has been assisting the National Institute of Statistics (NIS) for
improving basic statistics for national accounts compilation. A TA mission that visited Cambodia in
November 2011 assessed the methodologies used to compile national accounts and noted
inconsistencies in GDP estimates in current and constant prices, mainly for the period 20072010,
and provided guidance for revising the GDP series. The November 2011 mission also provided
support in developing the quarterly national accounts estimates. A mission to assess the progress in
implementing past TA recommendations is scheduled for February 2014.
Price statistics. The compilation of the consumer price index (CPI) suffers from insufficient coverage.
An updated CPI series was introduced starting in April 2012. Geographic coverage of the series has
been expanded to include Phnom Penh plus five provinces. Statistics Sweden continues to provide
assistance with the household budget survey and the CPI, but the project with Sweden is expected to
end in December 2013. An STA TA mission visited Phnom Penh in April 2012 to assist with improving
the CPI. The authorities indicated a need for assistance with developing a producer price index (PPI),
but no funds have been allocated to support the compilation of PPI.
Government finance statistics (GFS). The Ministry of Finance and Economy began implementing
reforms to the government accounting system and budgetary nomenclature in 2007, based on the
Government Finance Statistics Manual (GFSM) 2001, with the assistance of the IMF. In addition,
several STA missions have assisted with GFS compilation procedures within the GSFM 2001
framework. In 2011, Cambodia agreed to participate in the GFS project funded by the Government
of Japan. As a result, the authorities have benefited from two TA missions in 2012 and 2013 to assist
them in the compilation and implementation of GFS. The later has also worked on establishing a
bridge between the governments new chart of accounts (COA, approved by the authorities in
February 2013 and the GSFM 2001 classifications so that accounting records can be used as source
data in compiling GFS, with the objective of including the GFS in the new Financial Management
Integration System (FMIS). However, the coverage is limited and focusing on the operations of the
budget only, and is not fully integrating activities related to disbursement of external loans and
grants.
10
CAMBODIA
Monetary and financial statistics. The NBC compiles the balance sheet and survey for the central
bank and other depository institutions in accordance with the IMFs Monetary and Financial Statistics
Manual. Since August 2005, the NBC has reported monthly monetary and financial statistics to STA
using the Standardized Report Forms. The NBC received TA during the FSAP on the compilation of
financial soundness indicators (FSIs). The NBC now compiles monthly core FSIs and shares them with
IMF staff regularly.
External sector statistics. Cambodia is part of the Asian module of the Project on the Improvement
of External Sector Statistics (ESS) in the Asia Pacific Region (funded by the government of Japan
launched in October 2012), which aims to improve the accuracy, availability, comparability, and
timeliness of ESS in the region. The project consists mainly of short-term TA missions in three years.
The first TA mission to Cambodia in April 2013 prepared the foundation to improve and update the
ESS compilation methodology and techniques for implementing the sixth edition of the Balance of
Payments and International Investment Position Manual (BPM6). The NBC has made progress in
improving the compilation system following the 2012 balance of payments TA mission. The most
significant accomplishments include: (i) implementing an updated International Transactions
Reporting System (ITRS) coding list aligned with BPM6 requirements; (ii) reducing the reporting
threshold to US$ 5,000 within the ITRS to improve coverage; and (iii) developing a preliminary
questionnaire for the direct investment (DI) survey. However, further actions are needed in the
following areas: (i) improvement of cooperation and data-sharing between government agencies,
(ii) establishing survey on FDI positions and recording flows, including FDI inflows related to
hydropower projects and off-shore oil exploration; (iii) improvement of compilation techniques of
trade and external debt data; (iii) better data dissemination on NBCs website. The second TA
mission in November 2013 reviews progress in the implementation of the action plan agreed during
the April 2013 TA mission; and focus on the trial run of the FDI survey, the improvement of data
collection and compilation of goods for processing, travel, transportation and technical assistance,
and further improvement of the ITRS. Additionally, the mission assesses the consistency between ESS
and monetary and financial statistics.
Data Standards and Quality
Cambodia participates in the IMFs General Data Dissemination System. No data ROSC are available.
11
CAMBODIA
Cambodia: Table of Common Indicators Required for Surveillance

(As of December 2013)
Date of
latest
Observation
Exchange Rates
12/20/ 2013
Date
Received
12/22/
Frequency
of
1
Reporting
Frequency
of
1
Publication
Biweekly
Biweekly,
N/A
Frequency
of
1
Data
2013
International Reserve Assets and Reserve
Liabilities of the Monetary Authorities
12/ 2013
12/2013
Reserve/Base Money
4 week lag
10/2013
11/2013
M, 46
week delay
Broad Money
10/2013
11/2013
M, 46
week delay
Central Bank Balance Sheet
10/2013
11/2013
M, 46
week delay
Consolidated Balance Sheet of the Banking
10/2013
11/2013
System
M, 46
week delay
3
Interest Rates
10/2013
12/2013
M, 46
week lag
Consumer Price Index
10/2013
11/2013
M, 24
week lag
Revenue, Expenditure, Balance and Composition
4
8/2013
11/2013
of Financing General Government
Revenue, Expenditure, Balance and Composition
8/2013
11/2013
of Financing Central Government

Stocks of Central Government and Central
M, 46
week lag
M, 46
week lag
9/2013
11/2013
Government-Guaranteed Debt
M, 3 month
lag
External Current Account Balance
6/2013
9/2013
Q, 3 month
lag
Exports and Imports of Goods and Services
10/2013
12/2013
M, 46
week lag
GDP/GNP
2012
5/2013
A, 6 month
lag
Gross External Debt
9/2013
11/2013
M, 3 month
lag
International Investment Position
06/2013
9/2013
Q, 3 month
lag
1
Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I), and Not Available (N/A).
Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and
bonds.
4
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds)
and state and local governments.

6
Including currency and maturity composition.
Includes external gross financial asset and liability positions vis--vis nonresidents.
12
CAMBODIA
MAIN WEBSITES OF DATA

National Bank of Cambodia (www.nbc.org.kh)
Exchange rates
Balance of payments
Interest rates
Monetary survey
Credit granted by deposit money banks and nonbank financial institutions
Ministry of Economic and Finance (www.mef.gov.kh)
Government budget
Fiscal revenue, expenditure, and financing
National Institute of Statistics (www.nis.gov.kh)
Consumer Price Index
National accounts
Population census
Labor force survey
Socioeconomic survey
Household survey
13
Press Release No. 14/34

FOR IMMEDIATE RELEASE
February 4, 2014

700 19th Street, NW
Washington, D. C. 20431 USA
IMF Executive Board Concludes 2013 Article IV Consultation with Cambodia

On January 27, 2014, the Executive Board of the International Monetary Fund (IMF) concluded
the 2013 Article IV consultation1 with Cambodia, and considered and endorsed the staff
appraisal without a meeting.2
Economic activity remained strong in 2013 driven by robust exports, with garment exports
helped by preferential access to European Union, and tourism with more diversified destinations.
Real estate and construction also expanded rapidly supported by fast credit growth. Foreign
direct investment (FDI) remained strong partly driven by factories relocating from China and
Vietnam. Nonetheless, staff estimates real GDP growth to remain at 7 percent in 2013 due to the
sluggish global economic recovery, the recent floods, and the slowdown in economic activity
during the election period.
Private sector credit has been growing by about 30 percent (year-on-year) on average in the last
three years driven mainly by ample liquidity, including bank funding from abroad, and
1
Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually
every year. A staff team visits the country, collects economic and financial information, and discusses with officials
the country's economic developments and policies. On return to headquarters, the staff prepares a report, which
forms the basis for discussion by the Executive Board.
2
Article IV consultations are concluded without a Board meeting when the following conditions apply: (i) there are
no acute or significant risks, or general policy issues requiring Board discussion; (ii) policies or circumstances are
unlikely to have significant regional or global impact; (iii) in the event a parallel program review is being completed,
it is also being completed on a lapse-of-time basis; and (iv) the use of Fund resources is not under discussion or
anticipated.
2
heightened competition in the banking system. In the process, the loan-to-deposit (LTD) ratio
trended upwards to over 100 percent and credit-to-GDP ratio nearly doubled to 40 percent
diverging from past trends of sustainable financial deepening. The National Bank of Cambodia
raised the reserve requirements on foreign currency deposits in September 2012 by percentage
points (ppt) to 12 percent, but bank funding from abroad is not subject to any prudential limits.
Notwithstanding the rapid credit growth, inflationary pressures eased due to moderating
commodity prices. As a result headline inflation is estimated to average around 3 percent in 2013
once the impact of the recent floods on food prices subsides.
The current account deficit including official transfers is expected to stay flat at around
8 percent of GDP in 2013 owing to strong but moderating imports, and remain fully financed
by FDI and official loans. The deficit is projected to decline to 5 percent of GDP over the
medium term with improved competitiveness and diversification of exports, and lower imports
after the completion of large power projects. Gross official reserves stood at US$3.6 billion in
November, about 3 months of prospective imports, and this reserve coverage appears to be
adequate considering the long-term nature of Cambodias external debt, although the high degree
of dollarization would suggest that a higher level of reserves may be warranted. Consistent with
this stable external position, the real effective exchange rate has remained stable since the 2008
global financial crisis.
Fiscal consolidation remained broadly on track. Buoyant domestic demand and revenue
collection efforts improved revenue performance, while domestically-funded spending has been
in line with the budget. As a result, the fiscal deficit, excluding grants, is expected to narrow
further by about ppt of GDP in 2013, leaving the stock of government deposits, the only fiscal
buffers, at around 4 percent of GDP.
Executive Board Assessment
In concluding the 2013 Article IV consultation with Cambodia, Executive Directors endorsed
staffs appraisal, as follows:
3
Economic activity remains strong driven by robust exports, tourism, and construction despite
recent floods and some slowdown during the election. Growth is projected to pick up to
7 percent in 2014 and reach 7 percent over the medium term along with global recovery,
improvements in infrastructure, competitiveness, and investment climate. Inflation is expected to
remain low in 201314 due to stable food and fuel prices. The external position is stable
notwithstanding a declining reserve coverage of foreign currency deposits, and the real effective
exchange rate appears to be in line with fundamentals.
The U.S. tapering and slow European growth could expose Cambodias favorable outlook to
downside risks. On the domestic side, rapid credit growth and emerging risks in a fast changing
financial landscape could undermine financial stability; extreme weather conditions could affect
agriculture and growth, and labor market instability could disrupt garment production and
exports. Should these downside risks materialize, low fiscal buffers would require any additional
expenditure to be allocated to high-impact development spending.
The progress made by the authorities in implementing past Article IV recommendations is
welcome. They have improved revenue collection, formulated a revenue mobilization strategy
(RMS), and strengthened public financial management (PFM), including improving the
monitoring of contingent liabilities. They have also introduced negotiable certificates of deposit
(NCDs) to help develop the interbank market, improved financial supervisory capacity, and
established an initial memorandum of understanding (MoU) to establish a financial crisis
management framework. Continuous progress in many of these areas remains necessary and is
reflected in the priorities of this Article IV consultation.
The strong fiscal performance has continued, driven by substantial improvement in revenue
collection and prudent spending. Fiscal consolidation should continue to rebuild government
depositsthe only fiscal buffersin view of the expected decline in grants, to maintain longterm fiscal and debt sustainability, including by making the planned wage increases in 2014 a
part of a broader civil service reform. Successful implementation of RMS strategy and careful
management of contingent liabilities are needed to rebuild and safeguard the fiscal space.
Continuing with PFM reforms remains important to improve fiscal accountability and
transparency.
Rapid credit growth, increasing foreign bank financing and the buoyancy of the real estate and
construction sectors pose substantial macro financial risks especially in light of high
dollarization, which limits monetary policy effectiveness and lender-of-last-resort capacity. Steps
on multiple fronts are required to contain credit growth and safeguard financial stability.
Strengthening liquidity supervision and redefining the liquid asset ratio (LAR) to better capture
banks true liquidity conditions will improve their resilience to shocks. Fully enforcing the
reserve requirements to include foreign funds in the reserve base would help contain credit
growth. Should this fail to slow credit growth macro prudential measures such as loan-to-value
ratios (LTVs) and LTDs could be considered. Better monitoring of real estate developments, by
collecting more data including on developer financing, is also needed to contain risks. Finally,
the introduction of NCDs is a welcome first step toward market-based monetary operations.
Going forward establishing an interbank and foreign exchange market would be needed to begin
addressing dollarization, including by allowing more exchange rate flexibility.
The transition to risk-based supervision and the rapid expansion of the banking system continued
to put additional burden on the supervisory capacity, and in this context, the 2010 FSAP
recommendation of imposing a moratorium on new bank licenses remains appropriate. In view
of the limited resources, focusing on key emerging risks would improve the supervisory
effectiveness. Strengthening the financial crisis management framework is critical in managing
systemic risks and minimizing potential fiscal costs. The signing of an initial MoU between
supervisory agencies is welcome, and should be used to enhance cooperation at the policy and
technical levels, and expedite preparation of a second MoU on crisis resolution.
Cambodia has made good progress in achieving the Millennium Development Goals and reduced
poverty substantially. Continued improvements in human capital, including through education
and training, infrastructure, and business climate are needed to promote inclusive and sustainable
growth and further reduce poverty and income inequality. Plans to reduce regulatory
impediments to doing business are welcome, while improving education outcomes to catch up
with peers would take longer term efforts. Given the budgetary constraints, the near term priority
would be improving efficiency and reallocating spending within the budget envelope. New
5
initiatives, such as establishing a national training fund, could be considered over the medium
term following the successful implementation of PFM reforms.
Good faith efforts to resolve external arrears are welcome and should continue.
6
Cambodia: Selected Economic Indicators, 201014
2010
2011
2012
Est.
2013
Proj.
GDP in constant prices (annual percent change)

6.1
7.1
7.3
7.0
(Excluding agriculture)
6.9
8.6
8.4
8.6
Inflation (end-year)
3.1
4.9
2.5
4.1
(Annual average)
4.0
5.5
2.9
2.9
13.4
13.9
14.8
14.9
17.3
22.0
23.5
23.5
Money and credit (annual percent change)
Broad money
20.0
21.4
20.9
17.7
23.4
31.2
28.0
28.0
Revenue
17.0
15.6
16.9
17.1
Expenditure
19.9
19.6
20.7
20.1
-2.8
-4.1
-3.8
-3.0
Balance of payments (in millions of dollars, unless otherwise indicated)
Exports, f.o.b.
3,884
5,219
6,016
6,992
Imports, f.o.b. 1/
-5,466
-7,260
-8,426
-9,789
-441
-1,040
-1,233
-1,339
(In percent of GDP)
-3.9
-8.1
-8.7
-8.6
2,653
3,032
3,463
3,824
(In months of prospective imports)
3.7
3.6
3.6
3.6
External debt (in millions of dollars, unless otherwise indicated)
Public external debt 3/
3,337
3,841
4,486
5,052
(In percent of GDP)
28.7
29.7
31.6
32.8
Memorandum items:
Nominal GDP (in billions of riels)
47,102
52,154
56,711
62,559
(In millions of U.S. dollars)
11,255
12,890
14,118
Exchange rate (riels per dollar; period average)

4,185
4,046
4,017

1/ From 2011, includes large power sector projects.
includes the new SDR allocations made by the IMF.
2014
7.2
8.3
3.0
3.4
13.1
21.5
23.7
24.0
17.4
20.2
-2.8
8,002
-11,135
-1,430
-8.4
4,327
3.7
5,559
33.1
69,195

Cambodia 1433

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IMF Country Report No.

2013 ARTICLE IV CONSULTATION

International Monetary Fund

2014 International Monetary Fund

INTERNATIONAL MONETARY FUND

OUTLOOK AND RISK

INTERNATIONAL MONETARY FUND

Figure 1. Cambodia: Strong Growth with Downside Risks

Economic growth remains strong supported by garment

Contribution to Export Growth

Contribution to Growth, 200413

Hotels and transportation

Real GDP growth

Tourist arrivals have been robust, particularly from the

while stable food and fuel prices kept inflation low.

Tourist Arrivals, 200813

(Year-on-year percent change, 3-month moving average)

Land and boat arrivals

(Year-on-year percent change)

The recovery in the real estate and construction sector

however, rapid credit growth, particularly to these sectors,

Real Estate Prices

Credit to Private Sector

(Year-on-year percent change, 3-month moving average)

Commercial real estate inflation

Other Asian LICs, total (in percent of GDP) 1/

Cambodia, total (in percent of GDP)

Cambodia, total (y/y change)

INTERNATIONAL MONETARY FUND

Figure 2. Cambodia: Stable External Position

The current account deficit is fully funded by FDI, grants and

Contribution to Import Growth, 201016

Current Account Deficit and Financing Flows, 201016

Cambodias share in the E.U. garment market continues to

(In percent of GDP)

1/ Share of Cambodia in Asian LICs' (Bangladesh, Cambodia, Sri Lanka, and

Official Reserves, 200913

Gross official reserves (in months of imports, 3mma, right axis)

Official reserves (in percent of foreign currency deposits)

Gross official reserves (in billions of U.S. dollars, right axis)

Official reserves continue to grow, covering about 3

Foreign Direct Investment

(In percent, 12mma)

and FDI flows have been strong.

Garment Export Market Share, 201013 1/

INTERNATIONAL MONETARY FUND

INTERNATIONAL MONETARY FUND

INTERNATIONAL MONETARY FUND

Figure 3. Cambodia: Maintaining the Momentum of Fiscal Consolidation

The fiscal position has continued to improve and fiscal

(In percent of GDP)

(In percent of GDP)

Capital exp. (dom. funded)

Capital exp. (ext. funded)

(In percent of GDP)

Net acquisition of non-financial

Tax Collection in Asian LICs

(In percent of GDP)

However, Cambodias tax collection remains low by regional

Meanwhile, government spending has been prudent in line