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Government dips into its reserves

Sok Chan / Khmer Times Share:
Vongsey Vissoth, permanent secretary of state at the Ministry of Economy and Finance. KT/Pann Rachana

The government says that it has been withdrawing $1 billion from its savings to support spending in the fight against COVID-19 and to sustain, boost and restore the economy at a time national revenue is expected to drop from 20 percent to 30 percent, according to a senior official of the Ministry of Economy and Finance.

Permanent Secretary of State at the Ministry of Economy and Finance Vongsey Vissoth revealed the cut in the national budget at a news conference about government measures in response to the impact of the pandemic. He added it has cut off all unnecessary spending and will allocate expenses only to essential needs.

He added that the government will use around $1 billion of the $3.5 billion of government savings in 2020.

Vissoth revealed the government has been spending around $1.164 billion to fight off the damage caused by COVID-19. It has spent $10 million out of $100 million put aside on health, the economy and social intervention as part of its master plan, according to data from the Ministry of Economy and Finance (MEF).

Approximately $25 million of $64 million reserved has been spent on skills and vocational training and sponsorship for laid-off workers. All  of the $100 million allocated has been spent on aid for workers and $127 million out of $300 million savings has been spent on poor and vulnerable households.

A further $50 million has been allocated to a special fund for the Agriculture Rural Development Bank and a further $50 million to the SME Bank of Cambodia. Finally, another $200 million will be spent on credit guarantee funding and $300 million on financing vital facilities.

Vissoth said that so far the government has saved around $677 million from the current expense and investment expense at the national level. He added that if the national revenue dropped to just 20 percent of the total plan of 100 percent, the government can save up to around $200 million of the budget from the sub-national level. In consequence, the government’s savings in total will be more than $900 million.

“On one side, we cut revenue and on the other side we have to spend more, so we have to withdraw money from government savings,” he added.

Vissoth said in 2021 the government will have to use more government savings and will extend the possibility to borrow money from foreign countries, development partners and other available sources in order to reduce the burden on government savings.

“We thank development partners – the World Bank, ADB [Asian Development Bank], Japan, France and [South] Korea for providing loans to Cambodia not only to support development projects but also to support the national budget to bring relief to our national savings,” he said.

“In 2021, we will spend a lot of money as we try to increase revenues and we cannot cut more expenses. Thus, during the recovery stage we cannot restrict our spending, but we will spend only on necessary things, not everything. Some areas that are not important, those we can narrow down. We will boost our economy through the revenue we collected in 2021 and our savings and borrowings.”

Vissoth added that the country’s debt is less than 30 percent of gross domestic product (GDP). Therefore, Cambodia has a big opportunity to borrow more money (some bigger countries have debts higher than their GDP). He added that although this is a big crisis, the country’s debt situation is not failing in all scenarios because Cambodia has strong resilience.

“Our debt is sustainable because we have a strong public financing system with improved management in both expenses and revenue collection – and borrowing is strong,” he said.  “Next year, the government plans to borrow much more money from foreign countries and development partners not for development projects but for budget support for recovery.”

This year, Cambodia’s GDP growth is projected to fall to -1.9 percent. Some say in the worst-case scenario it will decrease to -5 percent.

However, because of Cambodia’s strong economic and public financial system, with a clear policy and long-term leadership of the government, Cambodia’s economy will not suffer a severe downturn.

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