The chairman of the Commission on Economy, Finance, Banking and Audit yesterday reiterated his view that the Kingdom’s foreign debt should not be a cause of major concern yet, as it is at just over 32 percent of gross domestic product (GDP).
Speaking at Khmer Times’ Cross Talk, Cheam Yeap, who is also a CPP lawmaker, said that as the country’s economy develops, the national budget grows larger every year. This, in turn, requires that the government increases foreign borrowing.
Following next year’s national budget, the government is requesting the National Assembly to borrow 1.4 billion SDR, about $1.5 billion, adding that the country’s foreign debt is still low, which enables the government to keep on borrowing.
“We could survive without foreign loans, but it would be difficult,” Mr Yeap said. “We must take any loan that we are offered in order to further the country’s development. But, we must follow our four principles to avoid repayment risks.
He said Prime Minister Hun Sen has given officials four principals that must be followed when borrowing from international partners.
“First, we must only take what we need. We only take out a loan if it matches our needs, our budget, and if our economic situation is such that we are in a position to repay it.”
The second rule, Mr Yeap explained, is that the country must only take concessional loans with very low interest rates, while the third is that they must be used for the development of priority sectors.
The last requirement is that loans “must be used efficiently and with accountability,” he said.
“Right now our concessional loans amount to less than 32 percent of our GDP. It is common practice among governments around the word to only take action when it surpasses 40 percent.
“So, I would like to tell the people not to worry too much because thanks to the four principles that we follow, the risk to our economy is very small.”
Preap Kol, Transparency International (Cambodia) executive director, in November told Khmer Times that foreign borrowing is necessary as the country continues to develop.
“If we continue to grow our economy sustainably like we have been doing to this point, we should not face any problems regarding repayments,” said Mr Kol.
He warned, however, that the country’s economy is susceptible to external factors as well as to potential tariffs on local rice in the European market, which would impact the country’s ability to pay back loans.
From 1993 to 2017, Cambodia borrowed a total of $9.6 billion through concessional loans with development partners, according to the Ministry of Economy and Finance. The Kingdom borrowed $6.3 billion from other governments, with $4.05 billion coming from China.