News Brief No. 00/88

News Brief: IMF Completes First Review Under Cambodia's PRGF Facility, Approves US$ 10.8 Million Disbursement

September 15, 2000

The Executive Board of the International Monetary Fund (IMF) today completed the first review of Cambodia’s performance under a three-year, SDR 58.5 million (about US$81.6 million) Poverty Reduction and Growth Facility (PRGF) (see Press Release No. 99/51). This opens the way for release of a further SDR 8.35 million (about US$10.8 million) from the facility.

At the conclusion of Executive Board discussions on Cambodia’s PRGF program, Mr. Shigemitsu Sugisaki, Deputy Managing Director said:

“Cambodia’s recent economic performance and policy implementation have been consistent with the objectives of the PRGF-supported program. The program for 2000 aims to further improve growth (which reached 5 percent in 1999) and to maintain the strategy of raising budgetary revenues and redirecting expenditures so as to have the maximum impact on reducing Cambodia’s pervasive poverty and improving social conditions. The authorities have made welcome progress in preparing their Interim Poverty Reduction Strategy Paper (PRSP), to be finalized later this year. It will focus on the extent and nature of poverty, the main policy measures to reduce poverty, and a strategy for ensuring the full participation of donors, NGOs, and other stakeholders in the preparation of a full PRSP.

“Regarding fiscal policy in the 2000 program, revenue measures include a broadening of the VAT base, increased royalty payments from tourist service providers, improved customs and tax administration, and collection of arrears from telecommunications services and leases of state assets. On the expenditure side, while overall budgetary control and the allocation of funds for health, education, and rural development have improved, the program includes additional steps to raise the effectiveness of expenditure in reducing poverty. Achieving targets for poverty-reducing expenditure over the medium term will depend on reducing lower priority outlays. Military demobilization, of which the first full phase is to be launched by the end of 2000, and a civil service reform are of critical importance in this connection. Fostering a smaller but better-remunerated civil service would assist in containing overall expenditure and in improving governance, as would improved budgetary control and public procurement procedures.

“The program also provides for continuing structural reform to improve growth prospects and strengthen the financial system. Building on progress to date, further actions are envisaged to implement a new system of forest concession management, revise forestry legislation, and strengthen the monitoring of forest crime. The National Bank of Cambodia will proceed with the re-licensing of commercial banks, improving supervisory capacity, and restructuring the Foreign Trade Bank.

“Continued successful implementation of the program will require close program monitoring, continued donor support, and effective use of planned technical assistance,” Sugisaki said.