Resident Representative in Cambodia


Cambodia—Recent Developments
July 2002

  • Cambodia's performance during the first two years under the Poverty Reduction Growth Facility (PRGF)-supported program has been broadly positive. Macroeconomic stability has been achieved, with economic growth averaging 7 percent and inflation remaining low. Progress has been achieved in structural reforms, including completion of the commercial bank re-licensing program, the launching of civil administration reform and military demobilization, and the initiation of reforms in tax and customs administration and public expenditure management.

  • The fifth review under the PRGF-supported program was completed on July 22, 2002, followed soon by the sixth disbursement of about US$ 11.2 million. The Executive Board of the International Monetary Fund (IMF) also approved the Cambodian authorities' request for a waiver for the nonobservance of a structural performance criterion on an unqualified audit of the end-2001 financial position of the Foreign Trade Bank (one of the two state-owned banks) in view of the intervening granting of an unqualified audit as of March 2002. All quantitative performance criteria and quantitative benchmarks under the PRGF-supported program through March 2002 were observed. Structural benchmarks were also observed, albeit with minor delays in some cases. The sixth and final review of the IMF arrangement is expected to be completed no later than end-February 2003.

  • Improvements and revisions have been made to a number of statistical series during the first half of 2002. A new consumer price index (CPI) for Phnom Penh was released by the National Institute of Statistics (NIS) in January 2002 which incorporates several significant changes to the index, including a re-basing of the series to 2000 prices, a revision of expenditure weights, the introduction of new items, and allowance for product substitution for a number of existing items. The revised CPI yields positive inflation of 0.66 percent during the twelve months ending in December 2001, compared to price decreases of 0.62 percent on the basis of the old CPI series. In May 2002, the NIS released revised estimates of the national accounts for the period 1993-2001, prepared with technical assistance from the Asian Development Bank and the IMF. The revisions reflect changes in methodology, improved data sources for fisheries, and revised data for tourism, among other things. The overall impact of the revisions was to increase the level of GDP by approximately 10 percent over the period.

  • In 2001, the Cambodian economy grew by 6 ¼ percent (slightly higher than envisaged in the PRGF-supported program), driven mainly by buoyant garment exports and a booming tourism sector, following a revised 7.7 percent increase in 2000. During the first five months of 2002, inflation was positive, but remained below 4 percent through end-May 2002. Broad money grew at close to 30 percent in May 2002 owing to an increase in domestic currency in circulation. The riel's exchange rate has remained broadly stable over the same period and stood at 3,910 per US$ at end-May 2002. Gross international reserves have increased significantly from US$556 million at end-January 2002 to US$ 627 million at end-May 2002 (equivalent to slightly more than 3 months of imports of goods and services). At end-May 2002, the current budget surplus stood at 1 percent of GDP, while the overall budget deficit (excluding grants) was contained at 5 percent of GDP.

  • Substantial technical assistance continues to be provided to Cambodia under the multi-donor financed Technical Cooperation Action Plan (TCAP) launched in October 2001. The project is designed to build local capacity in tax and customs administration and in budget and expenditure management over the medium term. Under the IMF component of the TCAP, resident and peripatetic advisers have been appointed at the Tax Department, the Customs and Excise Department, the National Treasury, the Ministry of Economy and Finance (MEF), the National Bank of Cambodia, and the Ministry of Planning, and most are assisted in their tasks by national counterparts. Advisors financed by other donors are assisting the MEF and the Ministry of Health. To strengthen TCAP management, a full-time national program manager was appointed on July 1, 2002. A revised project document reflecting adjustments in the activities for new priorities, additional inputs, and changes in program management was signed on July 18, 2002.

  • The sixth Consultative Group (CG) Meeting on Cambodia was held in Phnom Penh during June 19-21, 2002, organized and co-chaired by the World Bank and the Royal Government of Cambodia (RGC). Donors from 22 countries and seven international organizations met with representatives of the RGC. Donors commended the authorities for the solid macroeconomic performance and notable progress on structural reforms, but they also urged them to strengthen and accelerate reforms to reduce poverty and to improve governance. Donors also expressed particular concerns about the slow pace of legal and judicial reform, the weaker than desired improvements in spending in the priority social sectors (health, education, agriculture and rural development), the inadequate management of natural resources (especially forests), and the needs to promote development of the private sector. Reflecting in part its confidence in the authorities' commitment to reforms, the donor community pledged US$ 635 million in assistance over the next twelve months. The next CG meeting is expected to be held in Phnom Penh at the end of the year 2003.

  • The Royal Government of Cambodia, jointly with the World Bank, held a National Workshop on the Poverty Reduction Strategy Paper (PRSP) during May 28-29, 2002. The Council for Social Development (CSD), an inter-ministerial steering committee, is mandated by the RGC to monitor the preparation and the evaluation of the National Poverty Reduction Strategies. The workshop aimed at disseminating the draft matrices of strategies and action plans developed by members of the CSD. The full PRSP is expected to be completed by end-October 2002.

    Cambodia: Selected Economic Indicators, 1998-2002, July 2002 (57 KB pdf file)