• The fourth Poverty Reduction Growth Facility (PRGF) review was completed on February 6, 2002. The fifth disbursement of US$ 10 ½ million was approved by the IMF's Executive Board, bringing total disbursements under the PRGF-supported program to US$ 52 million. The IMF's Executive Board also approved the extension of the period of the arrangement by four months to February 28, 2003. During the first two years of the IMF-supported program, economic growth was sustained and inflation kept at very low levels. Progress has also been made in key areas of structural reforms, including bank restructuring, tax and customs administrations, public expenditure management, and military demobilization. However, delays have been experienced in some structural reforms. Quantitative performance criteria for end-September 2001 and structural performance criteria for October 2001 were met. Data indicate that quantitative benchmarks at end-December 2001 were also observed. The fifth review of the PRGF is expected to be completed by end-July 2002.

• Macro-economic developments and policy implementation in 2001 were generally consistent with expectations under the PRGF-supported program. Despite the recent deterioration of the international economic environment, real GDP growth for 2001 is estimated at 5 ¼ percent. The tourism industry and garment exports have been adversely affected by the slowing global economy, although less than expected. Inflation, measured by the consumer price index, was negative in the last quarter of 2001. The riel's exchange rate has remained broadly stable and stood at CR 3,900 per US$ at end-December 2001. During the same period, gross international reserves reached US$ 550 million (equivalent to close to 3 months of imports of goods and services). At end-November 2001, the current budget surplus was held to 1 ½ percent of GDP, while the overall budget balance (excluding grants) amounted to 5 ½ percent of GDP.

• Fiscal reforms in 2002 will continue to focus on improving revenue collection and shifting expenditure away from defense and security toward education, health, agriculture and rural development. The authorities are also committed to further improving expenditure management in 2002. Revenue is budgeted to increase to 13 ½ percent of GDP in 2002, up from an estimated outturn of 12 ½ percent of GDP in 2001. The 2002 budget anticipates a slightly larger increase in spending but, more importantly, further shifts spending away from defense and security. Indeed, expenditure for the key social sectors should rise to 3 ¾ percent of GDP in 2002, from 3 percent of GDP in 2001. The current surplus is budgeted at 1 ½ percent of GDP, while the overall deficit — fully financed by foreign financing — is expected to rise slightly to 6 percent of GDP. The authorities remain firmly committed to avoiding bank financing of the budget deficit.

• The Royal Government of Cambodia (RGC) is benefiting from substantial technical assistance being provided by several donors — including the IMF —under the Technical Cooperation Action Plan (TCAP). The TCAP was approved in May 2001 and officially launched in October 2001. The project aims at developing local capacity. Under the TCAP, resident and peripatetic advisers are providing assistance in helping to reform the banking sector, tax and customs administrations, budget and treasury management, and economic statistics. An important goal of the TCAP is to build lasting capacity in key agencies and ministries with macro-economic policy design and implementation responsibilities. To this end, national counterparts have been appointed to assist the resident advisers at the Tax Department, the Customs and Excise Department, the Ministry of Economy and Finance, and the National Treasury. The first annual review of progress achieved under the TCAP is scheduled for mid-2002.

• The full Poverty Reduction Strategy Paper (PRSP) is expected to be completed by end-October 2002. The Executive Boards of the IMF and the World Bank recently approved the RGC's status report on the PRSP. The process of developing the full PRSP involves the active participation of several ministries, development partners, and civil society (including NGOs). Progress has been made in strengthening poverty diagnosis and analysis, in a manner that ensures linkages between poverty reduction and the RGC's reform program. However, major issues remain, and should be addressed in the full PRSP. The Council for Social Development, an inter-ministerial committee led by the Ministry of Planning, has overall responsibility for the full PRSP. The latter would benefit from broader participation than heretofore, including the Ministry of Commerce and the Ministry of Public Works and Transport.

Table on Selected Economic Indicators, 2000-2001 (202KB pdf file)