## 1khmea2021001

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---

### Summary of Mission Outcomes
- Mission modality and period:
  - Remote technical assistance (TA) mission to the Ministry of Economy and Finance (MEF) conducted during ten days over the period of August 31–November 30, 2020. TIMS dates: August 31–September 11, 2020.
  - Activity part of Cambodia’s participation in the Japan-funded Government Finance Statistics (GFS) and Public Sector Debt Statistics (PSDS) Project for selected Asian countries (JSA3).
- Main mission objectives and activities:
  - Shared international experience in implementing the functional classification of expenditure (COFOG) and elaborated on specific COFOG issues during webinars with the MEF and line ministries.
  - Advised on a proper GFS classification of the COVID-19-related fiscal policy measures.
  - Participated in an inter-agency webinar and provided practical recommendations on reconciling GFS with general government data in national accounts, monetary and external sector statistics.
  - Advised on issues identified in the 2020 annual GFS data submission to the IMF.
  - Updated the action plan to further improve compilation and dissemination of fiscal statistics.
- Collaboration and coordination:
  - Mission liaised with Mr. Alexandros Mourmouras (Director, Capacity Development Office in Thailand), Mr. Rifaat Basanti (IMF Regional JSA3 GFS/PSDS Project Manager), Mr. Suhas Joshi (IMF Regional Treasury Advisor), Mr. Yasuhisa Ojima (IMF Resident Representative for Cambodia), and Ms. Magdalena Tomczynska-Smith (IMF Budget Planning Advisor for Cambodia).

### Key Findings on GFS/PSDS Implementation
- Inclusion of PAEs:
  - For the first time, MEF included public administrative establishments (PAEs) in annual GFS based on available source data.
  - GFS for the National Social Security Fund (NSSF) and other PAEs compiled using PAE’s aggregated budget execution reports for 2019 and submitted to the IMF’s Statistics Department (STA).
  - Source data for the NSSF need further investigation to confirm the surplus amounting to 1.6 percent of GDP in 2019 and the counterpart accumulation of currency and deposits.
  - Accounting and reporting procedures for PAEs should be reinforced to provide more reliable source data for transactions and balance sheet positions.
  - Recommendation: compile extended GFS time series for 2018 and back to 2015.
- Dissemination and use of GFSM 2014:
  - Further improvements in disseminating GFS; publication of financial balance sheets is pending and use of GFSM 2014-based data remains limited.
  - GDP (General Department of Policy), in cooperation with GDICDM (General Department of International Cooperation and Debt Management), initiated reporting to the joint World Bank–IMF PSDS Database.
  - Bridge table between the main aggregates of the national Table of Government Financial Operations (TOFE) and GFS was posted on the MEF’s website.
  - From January 2021, the GFS Team started compiling and reporting fiscal projections in the GFSM 2014 format (aggregated Statement of Government Operations) to the IMF (APD) and the ADB.
  - Mission advised publishing financial balance sheets and encouraged coordination between Statistics and Economic Analysis Department and Macroeconomic Department of the MEF’s GDP and between the GDP and the General Department of Budget (GDB).
- Inter‑agency reconciliation:
  - MEF initiated data reconciliation with the National Institute of Statistics (NIS) and the National Bank of Cambodia (NBC).
  - Recommended initial focus: reconciling GFS with MFS and Balance of Payment (BOP)/International Investment Position (IIP) focusing on government deposits, loans, government’s accounts receivable/payable, and grants and other transfers to and from abroad.
  - List of institutional units/entities included in general government and public sector should be coordinated.
  - Recommendation: a formal Memorandum of Understanding (MoU) between the MEF, the NIS, and NBC and a working group on data reconciliation. NIS and NBC expect MEF to lead drafting the MoU and Terms of Reference.
- COFOG implementation:
  - MEF derives COFOG by mapping sub-programs with COFOG codes; From 2020, FMIS generates COFOG reports covering current expenditure of line ministries.
  - Mapping internally financed capital expenditure of line ministries is work-in-progress.
  - Formal procedures needed for collecting and mapping source data for externally financed capital expenditure.
  - Only 18 provinces from 25 can map their programs to COFOG at this stage.
  - Classifying PAEs’ expenditure by COFOG is outside current MEF priorities.
- Recording COVID‑19 fiscal measures:
  - Mission advised on GFS classification of interventions, emphasizing treatment of government lending, capital injections, and guarantees.
  - Key guidance: in absence of realistic expectations of return or loan repayment, record as a capital transfer rather than increase in government financial assets.
  - Guarantees until called remain outside GFS as memorandum items.
  - Proper GFS recording complicated by absence of a clear definition of COVID-19 related fiscal measures, separate tracking accounts, and need for additional detail on economic substance; measurement difficulties include tax relief.
- Climate-related indicators:
  - Mission encouraged MEF to report, on a best effort basis, three sets of climate-related fiscal indicators: (i) environmental taxes, (ii) climate-related subsidies (both “brown” and “green” subsidies), and (iii) COFOG expenditures on environmental protection.
- Human resources and procedures:
  - Following promotion of former GFS Division Head, only two young economists are in charge of GFSM 2014-based fiscal statistics while having other tasks.
  - Need for sufficient human resources and technical guidelines describing compilation and dissemination procedures for GFSM 2014–based GFS and Quarterly PSDS.

### Priority Recommendations
- Target Date: April 2021
  - Draft technical guidelines on compiling and disseminating the GFSM 2014–based GFS and Quarterly PSDS — Responsible: GDP MEF
- Target Date: June 2021
  - Agree on the institutional coverage of the general government and public sector with the NIS and the NBC — Responsible: GDP MEF, NBC, NIS
- Target Date: September 2021
  - Validate 2019 statistics for the NSSF, complete annual GFS time series for 2019 and previous years back to 2015 with data for the NSSF and other PAEs, report GFS for general government to the IMF — Responsible: GDP, MEF

### Detailed Technical Recommendations (selected)
- Classifying Expenditure by COFOG — recommended actions and observations:
  - Recommended: Compile Table 7 (Expenditure by Functions of Government) covering general government’s expense and net acquisitions of nonfinancial assets.
  - Recommended: Formalize GDP’s responsibilities to compile and disseminate detailed COFOG data in close cooperation with GDB and GDICDM and report to IMF, FAO, OECD and other organizations.
  - Observations:
    - FMIS generates three COFOG report types for budgetary central government (BCG)’s current expense: (i) Functional Analysis of Government Expenditure, (ii) Government Expenditure Summary by Functions, and (iii) Analysis of Functional Expenditure by Ministries.
    - Total expense in COFOG reports from FMIS is substantially different from total expense in GFS Table 2; lack of data validation procedures may explain discrepancies.
    - BCG’s net acquisitions of nonfinancial assets and overall LG’s and PAE’s expenditure remain outside COFOG reports.
    - Formal procedures should account for disposals of nonfinancial assets when classifying expenditure by COFOG.
    - FMIS mapping includes activities relating to more than one sub-sub function; GDB provides methodological advice to line ministries.
- Recording COVID‑19 Related Fiscal Measures — observations, IMF STA categorization, and recommended action:
  - Authorities announced six rounds of policy intervention packages as of September 30, 2020.
  - MEF requested government units to rationalize spending on selected items by 50 percent; savings were reallocated to four priority areas: (i) fighting against COVID-19; (ii) maintaining social wellbeing; (iii) keeping businesses and jobs afloat; and (iv) maintaining security, public order, and social stability.
  - IMF STA grouped commonly observed interventions into eight categories: A) increased healthcare spending, B) provision of assistance to households, C) relaxation of tax obligations for households and corporations, D) provision of financial assistance to corporations (and other units other than households), E) capital injections, establishment of new, or extended, lending facilities and provision of guarantees, F) emergency assistance from international organizations and foreign governments, G) liquidity and quasi-fiscal operations by public financial institutions, and H) Debt reorganization.
  - Recommended: Fiscal accounting and budget classification should provide for separate recording of traditional fiscal policy interventions and new measures related to COVID-19 and ensure consistency in recording policy measures in GFS and other macroeconomic statistics.
- Improving Annual GFS Time Series — recommended action:
  - Complete annual GFS time series for 2018 and previous years back to 2015 with data for NSSF and other PAEs, and report consolidated GFS for general government to the IMF.

### NSSF data issues and GFS treatment
- Findings and data limitations:
  - NSSF’s revenue rose from 0.48 percent of GDP in 2018 to 1.93 percent of GDP in 2019.
  - Increase mainly due to implementation of a new Health Care Scheme.
  - In absence of detailed source data for expense, GFS Team estimated social benefits for 2019 based on trend in detailed NSSF reports for previous years.
  - Resulting surplus was balanced by an increase in NSSF’s currency and deposits (GFS code 3212).
  - Detail of NSSF’s expense and transactions in financial assets needs further investigation and validation.
  - STA position: STA will consider GFS for the NSSF as work-in-progress, which is not subject to dissemination.
- Recommended action:
  - Make additional investigation to validate large accumulation of currency and deposits by the NSSF and update annual GFS for 2019.

### PAEs, LGs, and quality issues
- PAEs:
  - PAEs’ overall balance increased from 0.55 percent of GDP in 2017 to 2.14 percent of GDP in 2019.
  - Financial reports provide more detailed source data for GFS than aggregated budget execution data.
  - Only 11 PAEs from 29 are presenting financial reports to the MEF with a two-year time lag.
  - Target: MEF should aim at using financial reports as source data for PAEs’ GFSM 2014-based GFS.
- Compensation of employees vs Use of goods and services — key statistics (KHR Billion):
  - 21. Compensation of employees by year: 2012 60.91; 2013 61.46; 2014 90.20; 2015 225.08; 2016 309.00; 2017 314.64; 2018 418.45; 2019 500.7
  - 22. Use of goods and services by year: 2012 375.22; 2013 273.66; 2014 533.96; 2015 684.97; 2016 696.59; 2017 782.48; 2018 1,035.44; 2019 1,799.7
  - Issue: For local governments (LGs) Use of goods and services exceeds Compensation of employees contrary to international benchmarks; possible inclusion of capital expenditure in Use of goods and services.
  - Recommended: Improve GFS for LGs to ensure accurate split between GFS code 21, GFS code 22, and GFS code 31.
- Distinction current vs capital:
  - Importance: correct distinction affects measurement of government’s non-market output and gross fixed capital formation; incorrect distinction distorts general government’s contribution to domestic production and accumulation of fixed assets.
  - Suggested approach: in-depth analysis of sample LGs to identify correct proportions and apply across LG spending.

### Financial balance sheets for general government and public sector
- Rationale and benefits:
  - Balance sheets support stock-flow reconciliation, improve fiscal statistics quality, help analyze solvency and sustainability, identify vulnerabilities, and assess fiscal risks.
- MEF progress and complications:
  - Pilot balance sheets for 2015–2018 being validated with source data providers and reconciling government financial assets and liabilities in GFS, MFS, and IIP.
  - Compilation for PAEs complicated by absence of full accounts for most PAEs; availability of source data for SOEs and major PPP projects needs further investigation.
- Recommended actions:
  - Reconcile different source data for loans and on‑lending loans, acquisition of nonfinancial assets financed from abroad, and debt liabilities to validate the 2015–2018 consolidated balance sheet (Table 6) for BCG and LG.
  - Publish 2015–2018 consolidated balance sheet (Table 6) for budgetary central government and local governments as part of GFS on the MEF website.

### Action Plan to Improve GFS/PSDS Compilation and Dissemination (selected items)
- Indicative targets and responsibilities (selected entries):
  - March 2021: Draft a MoU, send to NIS and NBC for comments, prepare and approve final MoU — Responsible: GDP MEF, NBC, NIS.
  - March 2021: Form technical working group on reconciling GFS with other macroeconomic datasets (NBC and NIS) — Responsible: GDP MEF, NBC, NIS.
  - March 2021: Reconcile GG financial balance sheet data between MEF and NBC (IIP, MFS), explain reasons for remaining differences — Responsible: GDP MEF, NBC.
  - April 2021: Coordinate and agree institutional coverage of the general government and public sector with NBC — Responsible: GDP MEF, NBC.
  - April 2021: Reconcile different source data on loans and on‑lending loans, acquisition of nonfinancial assets financed from abroad, and debt liabilities to validate 2015–2018 consolidated balance sheet (Table 6) — Responsible: GDNT, GDICDM, GDP MEF.
  - May 2021: Publish 2015–2018 consolidated balance sheet (Table 6) for BCG and LG as part of GFS on MEF website — Responsible: GDP MEF.
  - May 2021: Improve GFS for LGs to ensure accurate split between GFS code 21, GFS code 22, and GFS code 31 — Responsible: GDP MEF, GDNT.
  - September 2021: Investigate validate large accumulation of Currency and deposits by NSSF and update annual GFS for 2019 — Responsible: GDP MEF.
  - September 2021: Complete annual GFS time series for 2018 and previous years back to 2015 with data for NSSF and other PAEs, report consolidated GFS for general government to the IMF — Responsible: GDP MEF.
- Additional dissemination/process targets:
  - March 2021: Post explanation on advantages of using GFS in fiscal analysis on the MEF website — Responsible: GDP MEF.
  - September 2021: Improve data coverage of quarterly PSDS to include accounts payable and report to the Joint World Bank–IMF PSDS database — Responsible: GDP and GDICDM, MEF.
  - September 2021: Compile and publish consolidated GFS for BCG and LG on a quarterly basis — Responsible: GDP MEF.

### Implementation status of previous mission’s recommendations (selected outcomes)
- Coordination and coverage:
  - Target Date: May 2020 — Coordinate and agree on institutional coverage of GG with NIS and NBC — Implementation Status: Partly Implemented; workshops and technical meetings held; further coordination needed.
- PAEs bridging and reporting:
  - Target Date: May 2020 — Bridge 2018 budget execution reports of PAEs with GFSM 2014 formats and compile consolidated GFS — Implementation Status: Implemented; GDP’s GFS Team bridged 2015–2019 budget execution reports for 29 PAEs and sent consolidated GG GFS for 2018 to STA in June 2020.
  - Target Date: June 2020 — Bridge 2018 financial reports of 11 PAEs with GFSM 2014 formats — Implementation Status: Partly Implemented; work-file reported to STA in June 2020; further comparison needed.
  - Target Date: October 2020 — Bridge 2019 budget execution reports of PAEs and compile consolidated GFS including Table 6 — Implementation Status: Partly Implemented; consolidated GFS for 2019 submitted (Statement of Government Operations, Tables 1-3); STA considers SSF data work-in-progress.
- Financial balance sheet publication:
  - Target Date: October 2020 — Publish 2015–2018 consolidated balance sheet (Table 6) for BCG and LG on MEF website — Implementation Status: Not Implemented; pilot balance sheets available but not published.
- COFOG and classification:
  - Target Date: August 2020 — Review source data for GFS COFOG (Table 7) for BCG — Implementation Status: Implemented; mapping of programs/sub-programs for 34 ministries uploaded into FMIS for current expense; remaining issues on mapping capital and externally financed expenditure and reconciling totals with GFS Table 2.
- Higher frequency data and PSDS:
  - Target Date: May 2020 — Establish regular reporting to Joint World Bank–IMF quarterly PSDS database — Implementation Status: Implemented; quarterly PSDS published and submitted semi-annually following national publication; further enhancement needed.

### GFS Classification of COVID‑19 Related Fiscal Interventions (selected)
- Section A. Increased Healthcare Spending — selected GFS mappings:
  - 21 Compensation of employees — for hiring additional government health workers or increasing pay for existing government health employees.
  - 22 Use of goods and services — payments when government buys services from private healthcare contractors, virus testing purchased from private contractors, medical supplies, operational expense in government hospitals, constructions not meeting fixed asset definition (e.g., temporary tents).
  - 2632 Grants to other general government units, Capital — payment to another government unit that will be economic owner.
  - 2822 Transfers n.e.c., Capital — payment to unit/entity outside general government that will be economic owner.
  - 3111 Net Investment in Nonfinancial Assets, Buildings and structures — construction of new health facilities meeting fixed asset definition.
  - 3112 Net Investment in Nonfinancial Assets, Machinery and equipment — acquisition of medical machinery and equipment.
- Section B. Provision of Assistance to Households — selected measures and GFS mappings:
  - Monthly cash transfer program for poor and vulnerable households (launched June 2020) — GFS Classification: 272 Social assistance benefits (current transfers paid directly from budget; similar transfers paid through NSSF would be Social security benefits GFS 271).
  - Cash-for-work program — GFS Classification: 22 Use of goods and services for payments to non‑government employees for maintenance/repair of community assets; 3111 Net Investment in Nonfinancial Assets for major renovation/construction where government becomes economic owner.
  - Wages subsidies and skill training programs — GFS Classification: 272 Social assistance benefits for payments to unemployed people who completed training; 2821 Transfers n.e.c., Current for payments to non‑government training institutions.
- IMF STA grouping of interventions (for recording consistency): A) increased healthcare spending, B) assistance to households, C) tax relaxation, D) financial assistance to corporations, E) capital injections/lending facilities/guarantees, F) emergency assistance from international organizations/foreign governments, G) liquidity and quasi‑fiscal operations by public financial institutions, H) Debt reorganization.

### Tax measures, financing schemes, guarantees — GFS treatment (selected)
- Tax measures and fee treatments:
  - Corporate income tax and monthly tax exemptions for specified tourism businesses in Phnom Penh, Siem Reap, Sihanouk, Kep, Kampot, Bavet and Poipet — GFS treatment: reduction in expected revenue under relevant tax category (11 Taxes); impact reflected in taxes actually collected; specific amounts could be memorandum items.
  - Tax waiving on transfer tax for purchases below 70,000 USD from licensed property developers.
  - Fee deferral of civil aviation fee and exemptions from renewal fees for tourism licenses — GFS classification: 1422 Other revenue, Administrative fees (reduction in fees); if payment clearly out of proportion to cost classify as GFS 1145.
  - Non-payment to NSSF for tourism businesses — GFS classification: 121 Social security contributions (reduction in compulsory social security contributions).
- Provision of financial assistance to corporations — wage subsidies:
  - Government contributes 20% to the mandated minimum wage for workers in specified tourism-related establishments — GFS classification: 25 Subsidies where intent is to support employer (not workers).
- Special financing schemes (ARDB and SME Bank):
  - Possible GFS classifications depending on government relationship and contracts:
    - 25 Subsidies — if banks are public corporations with recurrent deficits covered by government transfers.
    - 2822 Transfers n.e.c., Capital — if government makes investments without expectation of realistic return.
    - 3204 Net acquisition of financial assets, Loans — if government lending with contractual financing agreement.
    - 3205 Net acquisition of financial assets, Equity — if government expects realistic return; payments can be partitioned between 3205 and 2822 in some cases.
- Credit Guarantee Fund:
  - Guarantees are contingent liabilities typically recorded as memorandum items.
  - 1422 Other revenue, Administrative fees — if government receives fees for provision of guarantees.
  - 3304 Net incurrence of liabilities, Loans — if guarantee has very high likelihood of being regularly called (treat as debt assumption from inception).
  - Memorandum items recommended for fiscal risk management and transparency.

### Appendix IV — Importance of GFS and main directions
- Key benefits of using GFSM 2014-based framework (selected):
  - GFS provide internationally comparable fiscal data, summary information on overall performance and financial position, comprehensive inputs for fiscal policy analysis, support monitoring SDGs 2030, integrate economic flows with balance sheets for long-term sustainability, and provide inputs for other macroeconomic statistics.
- GFS contributions to strengthening PFM (selected):
  - Integral part of public fiscal reporting in Cambodia; provide indicators for transparency and accountability; detailed balance sheet data support PFM and balance sheet analysis; improve oversight of SOEs and management of fiscal risks; support assessment of fiscal decentralization.
- Main challenges in improving GFS quality (selected):
  - Absence of formal provisions assigning responsibility and authority for GFS and PSDS.
  - Absence of detailed source data for extrabudgetary units (PAEs) and public corporations.
  - Limited data sharing and coordination among statistics-producing agencies; need MoU and technical working group.
  - Lack of resources and support infrastructure: limited staff (only two economists assigned to GFS), facilities, computing resources; need technical documentation and guidelines.
  - Limited understanding of advantages of GFSM 2014 in fiscal analysis; limited GFS/PSDS scope and pending dissemination of pilot balance sheets.
- Main directions proposed:
  - Enhance cooperation among statistics-producing agencies and reconcile data across GFS, national accounts, external sector, and monetary statistics.
  - Improve quality of source data for GFS and PSDS, including accounting and reporting for PAEs, externally financed projects, and SOEs.
  - Expand scope of annual GFS to include other economic flows and balance sheet positions, detailed functional classification, and counterpart sectors.
  - Formalize responsibilities and coordinate GFS/PSDS developments with the PFM Reform Agenda.

*Source: IMF mission report — 1. Priority Recommendations (Cambodia), remote TA mission to MEF, August 31–November 30, 2020.*

### 1. Priority Recommendations _______________________________________________________________________ 7

### 1. Priority Recommendations

### Summary of Mission Outcomes
- The remote technical assistance (TA) mission to the Ministry of Economy and Finance (MEF) was conducted during ten days over the period of August 31–November 30, 2020. TIMS dates: August 31–September 11, 2020.
- Activity was part of Cambodia’s participation in the Japan-funded Government Finance Statistics (GFS) and Public Sector Debt Statistics (PSDS) Project for selected Asian countries (JSA3).
- Mission objectives and activities:
  - Shared international experience in implementing the functional classification of expenditure (COFOG) and elaborated on specific COFOG issues during webinars with the MEF and line ministries.
  - Advised on a proper GFS classification of the COVID-19-related fiscal policy measures.
  - Participated in an inter-agency webinar and provided practical recommendations on reconciling GFS with general government data in national accounts, monetary and external sector statistics.
  - Advised on issues identified in the 2020 annual GFS data submission to the IMF.
  - Updated the action plan to further improve compilation and dissemination of fiscal statistics.
- Collaboration and coordination:
  - Mission liaised with Mr. Alexandros Mourmouras (Director, Capacity Development Office in Thailand), Mr. Rifaat Basanti (IMF Regional JSA3 GFS/PSDS Project Manager), Mr. Suhas Joshi (IMF Regional Treasury Advisor), Mr. Yasuhisa Ojima (IMF Resident Representative for Cambodia), and Ms. Magdalena Tomczynska-Smith (IMF Budget Planning Advisor for Cambodia).
  - Appendix I lists the main official contacts.

### Key Findings on GFS/PSDS Implementation
- Inclusion of PAEs:
  - For the first time, the MEF included public administrative establishments (PAEs) in annual GFS based on available source data.
  - GFS for the National Social Security Fund (NSSF) and other PAEs were compiled using PAE’s aggregated budget execution reports for 2019 and were submitted to the IMF’s Statistics Department (STA).
  - Source data for the NSSF need further investigation to confirm the surplus amounting to 1.6 percent of GDP in 2019 and the counterpart accumulation of currency and deposits.
  - Accounting and reporting procedures for PAEs should be reinforced to provide more reliable source data for transactions and balance sheet positions.
  - Recommendation: compile extended GFS time series for 2018 and back to 2015.
- Dissemination and use of GFSM 2014:
  - Further improvements have been made in disseminating GFS, though publication of financial balance sheets is still pending, and use of GFSM 2014-based data remains limited.
  - The General Department of Policy (GDP) in cooperation with the General Department of International Cooperation and Debt Management (CDICDM) initiated reporting to the joint World Bank-IMF PSDS Database.
  - The bridge table between the main aggregates of the national Table of Government Financial Operations (TOFE) and GFS was posted on the MEF’s website.
  - In January 2021, the GFS Team started compiling and reporting fiscal projections in the GFSM 2014 format (aggregated Statement of Government Operations) to the IMF (APD) and the ADB.
  - Mission advised on publishing financial balance sheets and encouraged coordination between Statistics and Economic Analysis Department and Macroeconomic Department of the MEF’s GDP as well as between the GDP and the General Department of Budget (GDB).
- Inter-agency reconciliation:
  - The MEF initiated data reconciliation work with the National Institute of Statistics (NIS) and the National Bank of Cambodia (NBC).
  - Initial focus recommended on reconciling GFS with MFS and Balance of Payment (BOP)/ International Investment Position (IIP) focusing on government deposits, loans, government’s accounts receivable/payable, and grants and other transfers to and from abroad.
  - The list of institutional units/entities included in general government and public sector should be coordinated.
  - Reconciliation of national accounts for general government could start with Production Account and Income Account.
  - Recommendation: a formal Memorandum of Understanding (MoU) between the MEF, the NIS, and NBC and a working group on data reconciliation. NIS and NBC expect the MEF to take the lead in drafting the MoU and Terms of References for a working group.
- COFOG implementation:
  - MEF derives functional classification of expenditure by mapping sub-programs with COFOG codes.
  - From 2020, the Financial Management Information System (FMIS) generates COFOG reports covering current expenditure of line ministries. Mapping internally financed capital expenditure of line ministries is work-in-progress.
  - Formal procedures need to be established for collecting and mapping source data for externally financed capital expenditure.
  - Relating to local governments, only 18 provinces from 25 can map their programs to COFOG at this stage.
  - Classifying PAEs’ expenditure by COFOG is outside current MEF’s priorities.
- Recording COVID-19 fiscal measures:
  - Mission advised on GFS classification of fiscal policy interventions, emphasizing treatment of government lending, capital injections, and guarantees.
  - Key guidance: in the absence of realistic expectations of return on an investment or loan repayment, a capital transfer should be recorded rather than an increase in government financial assets.
  - Guarantees until called remain outside GFS as memorandum items.
  - Proper GFS recording complicated by absence of a clear definition of COVID-19 related fiscal measures, separate accounts to track measures, and need for additional detail on economic substance of operations; measurement difficulties include tax relief.
- Climate-related indicators:
  - Mission raised awareness of IMF’s efforts in populating a Climate Indicators Dashboard in early 2021.
  - Mission encouraged MEF to report, on a best effort basis, three main sets of climate-related fiscal indicators: (i) environmental taxes, (ii) climate-related subsidies (both “brown” and “green” subsidies), and (iii) COFOG expenditures on environmental protection.
- Human resources and procedures:
  - Following promotion of former GFS Division’s Head, only two young economists are in charge of GFSM 2014-based fiscal statistics while having other simultaneous tasks.
  - Need for sufficient human resources and technical guidelines describing compilation and dissemination procedures for GFSM 2014–based GFS and Quarterly PSDS.

### Priority Recommendations (Table 1)
- Target Date: April 2021
  - Priority Recommendation: Drafting technical guidelines on compiling and disseminating the GFSM 2014–based GFS and Quarterly PSDS
  - Responsible Institutions: GDP MEF
- Target Date: June 2021
  - Priority Recommendation: Agree on the institutional coverage of the general government and public sector with the NIS and the NBC
  - Responsible Institutions: GDP MEF, NBC, NIS
- Target Date: September 2021
  - Priority Recommendation: Validate 2019 statistics for the NSSF, complete annual GFS time series for 2019 and previous years back to 2015 with data for the NSSF and other PAEs, report GFS for general government to the IMF
  - Responsible Institutions: GDP, MEF

### Detailed Technical Recommendations (selected)
- Classifying Expenditure by COFOG
  - Recommended Actions:
    - Compile Table 7 (Expenditure by Functions of Government) covering general government’s expense and net acquisitions of nonfinancial assets.
    - Formalize the GDP’s responsibilities to compile and disseminate detailed COFOG data in close cooperation with the GDB and GDICDM as source data providers and report it to the IMF, FAO, OECD and other interested international organizations.
  - Observations:
    - FMIS generates three COFOG report types for budgetary central government (BCG)’s current expense: (i) Functional Analysis of Government Expenditure, (ii) Government Expenditure Summary by Functions, and (iii) Analysis of Functional Expenditure by Ministries.
    - Total expense in COFOG reports from FMIS is substantially different from total expense in GFS Table 2; lack of data validation procedures may explain discrepancies.
    - BCG’s net acquisitions of nonfinancial assets and overall LG’s and PAE’s expenditure remain outside COFOG reports.
    - Formal procedures should account for disposals of nonfinancial assets when classifying expenditure by COFOG.
    - FMIS mapping includes activities relating to more than one sub-sub function; GDB provides methodological advice to line ministries.
- Recording COVID-19 Related Fiscal Measures
  - Observations and guidance:
    - Authorities announced six rounds of policy intervention packages as of September 30, 2020.
    - MEF requested government units to rationalize spending on selected items by 50 percent; savings from budget rationalization were reallocated to four priority areas: (i) fighting against COVID-19; (ii) maintaining social wellbeing, especially for poor and unemployed people; (iii) keeping businesses and jobs afloat to maintain and promote domestic economic activities; and (iv) maintaining security, public order, and social stability.
    - IMF STA grouped commonly observed interventions into eight categories: A) increased healthcare spending, B) provision of assistance to households, C) relaxation of tax obligations for households and corporations, D) provision of financial assistance to corporations (and other units other than households), E) capital injections, establishment of new, or extended, lending facilities and provision of guarantees, F) emergency assistance from international organizations and foreign governments, G) liquidity and quasi-fiscal operations by public financial institutions, and H) Debt reorganization.
    - Recommended Action:
      - Fiscal accounting and budget classification should provide for separate recording of traditional fiscal policy interventions and new measures related to COVID-19.
      - Ensure consistency in recording policy measures in GFS and other subsets of macroeconomic statistics.
- Improving Annual GFS Time Series
  - Recommended Action:
    - Complete annual GFS time series for 2018 and previous years back to 2015 with data for NSSF and other PAEs, report consolidated GFS for general government to the IMF.

*Source: IMF mission report — 1. Priority Recommendations (Cambodia), remote TA mission to MEF, August 31–November 30, 2020.*

### 20. Source data for the NSSF need further investigation and validation before GFS for the

### 20. Source data for the NSSF need further investigation and validation before GFS for the

### NSSF data issues and GFS treatment
- Finding: The NSSF’s revenue rose from 0.48 percent of GDP in 2018 to 1.93 percent of GDP in 2019.
- Reported cause: The mission was informed that this increase was mainly due to the implementation of a new Health Care Scheme.
- Data limitation: In the absence of detailed source data for expense, the GFS Team estimated the amount of social benefits for 2019 based on the trend in the detailed NSSF’s reports for previous years.
- Accounting consequence: The resulting surplus was balanced by an increase in the NSSF’s currency and deposits (GFS code 3212).
- Remaining issue: The detail of the NSSF’s expense and transactions in financial assets needs further investigation and validation.
- STA position: In the meantime, STA will consider GFS for the NSSF as work-in-progress, which is not subject to dissemination.

Recommended Action:
- Make additional investigation to validate large accumulation of currency and deposits by the NSSF and update annual GFS for 2019.

### PAEs: accounting and reporting concerns
- Finding: The PAEs’ overall balance increased from 0.55 percent of GDP in 2017 to 2.14 percent of GDP in 2019, indicating the importance of covering PAEs in fiscal reports.
- Data source observation: Financial reports represent more detailed and integrated source data for GFS compilation than aggregated budget execution data.
- Current capability: Aggregated PAE budget execution reports could support compilation of GFS time series for general government at first stage.
- Target improvement: MEF should aim at using financial reports as source data for PAEs’ GFSM 2014-based GFS.
- Implementation status: Applying government accounting and reporting rules was part of PAEs’ reform agenda.
- Coverage gap: Only 11 PAEs from 29 are presenting financial reports to the MEF with a two-year time lag.

### Compensation of employees vs Use of goods and services (quality issue)
- Issue description: Additional GFS quality issue relates to the ratio of Compensation of employees to Use of goods and services.
- International benchmark: Based on other countries’ statistics in the IMF GFS database, Compensation of employees (GFS code 21) is usually higher than Use of goods and services (GFS code 22) for any subsector of general government.
- Cambodia anomaly: This is not the case for local governments (LGs) in the annual GFS time series for Cambodia.
- Possible explanation: The total amount of Use of goods and services for LGs might include capital expenditure for major renovations and reconstructions of existing buildings, roads, bridges, irrigation system, and technical equipment, which should be treated as acquisitions of fixed assets rather than current expense.
- Planned remedy: In the future, the LGs will follow a new MEF’s Guideline on Fixed Assets Accounting to distinguish between current and capital expenditure.

Key statistics (Table 2. Compensation of Employees and Use of Goods and Services) (KHR Billion)
- GFS Expense / Year: 2012 2013 2014 2015 2016 2017 2018 2019
- 21. Compensation of employees: 60.91 61.46 90.20 225.08 309.00 314.64 418.45 500.7
- 22. Use of goods and services: 375.22 273.66 533.96 684.97 696.59 782.48 1,035.44 1,799.7

Recommended Action:
- Improve GFS for LGs to ensure an accurate split between Compensation of employees (GFS code 21), Use of goods and services (GFS code 22), and Acquisitions of nonfinancial assets (GFS code 31).

### Distinction between current and capital spending: implications for GDP measures
- Importance: A clear distinction between current and capital spending is important for measuring government’s non-market output and gross fixed capital formation.
- Conceptual mapping: Intermediate consumption in SNA is close to Use of goods and services in GFS.
- Distortion risk: Incorrect distinction between current and capital spending distorts the amount of general government’s contribution to domestic production and accumulation of fixed assets.
- Suggested approach: Conduct in-depth analysis of sample LGs to identify correct proportions of Compensation of employees, Use of goods and services, other categories of current expense, and Acquisitions of fixed assets and other transactions in assets, then apply these proportions across all LG’s spending.

### Financial balance sheets for general government and public sector
- Rationale: Developing and disseminating financial balance sheets for general government and the entire public sector will usefully support fiscal policy analysis and decisions.
- Benefits: Balance sheets provide for stock-flow reconciliation, improve the quality of fiscal statistics, help analyze solvency and sustainability across time, identify vulnerabilities, and assess fiscal risks.
- MEF progress: MEF has been working on validating the pilot balance sheets for 2015–2018 with source data providers and reconciling government’s financial assets and liabilities in GFS, MFS, and IIP.
- Complication: Compilation for PAEs is complicated due to the absence of full set of accounts for most PAEs.
- Data gaps: Availability of source data for state-owned enterprises (SOEs) and major public–private partnership (PPP) projects needs further investigation.

Recommended Actions:
- Reconcile different source data for loans and on-lending loans, acquisition of nonfinancial assets financed form abroad, and debt liabilities to validate the 2015–2018 consolidated balance sheet (Table 6) for BCG and LG.
- Publish 2015–2018 consolidated balance sheet (Table 6) for budgetary central government and local governments as part of GFS on the MEF website.

### Action Plan to Improve GFS/PSDS Compilation and Dissemination (selected items)
- Objective: Data are compiled and disseminated using the coverage and scope of the latest manual/guide.

Indicative target and recommendations (selected entries):
- March 2021: Draft a MoU, send it to the NIS and the NBC for comments, prepare and approve the final version of the MoU — Responsible: GDP MEF, NBC, NIS.
- March 2021: Form a technical working group on reconciling GFS with data on general government in other datasets of macroeconomic statistics (NBC and NIS) — Responsible: GDP MEF, NBC, NIS.
- March 2021: Reconcile GG financial balance sheet data between MEF and NBC (IIP, MFS), explain the reasons for remaining differences — Responsible: GDP MEF, NBC.
- April 2021: Coordinate and agree on the institutional coverage of the general government and public sector with NBC — Responsible: GDP MEF, NBC.
- April 2021: Reconcile different source data on loans and on-lending loans, acquisition of nonfinancial assets financed form abroad, and debt liabilities to validate the 2015–2018 consolidated balance sheet (Table 6) for BCG and LG — Responsible: GDNT, GDICDM, GDP MEF.
- May 2021: Publish 2015–2018 consolidated balance sheet (Table 6) for budgetary central government and local governments as part of GFS on the MEF website — Responsible: GDP MEF.
- May 2021: Improve GFS for LGs to ensure an accurate split between Compensation of employees (GFS code 21), Use of goods and services (GFS code 22), and Acquisitions of nonfinancial assets (GFS code 31) — Responsible: GDP MEF, GDNT.
- September 2021: Make additional investigation to validate large accumulation of Currency and deposits by the NSSF and update annual GFS for 2019 — Responsible: GDP MEF.
- September 2021: Complete annual GFS time series for 2018 and previous years back to 2015 with data for NSSF and other PAEs, report consolidated GFS for general government to the IMF — Responsible: GDP MEF.

Additional selected process and dissemination targets:
- March 2021: Post explanation on the advantages of using GFS in fiscal analysis on the MEF website — Responsible: GDP MEF.
- September 2021: Improve data coverage of quarterly PSDS to include accounts payable and report to the Joint World Bank–IMF PSDS database — Responsible: GDP and GDICDM, MEF.
- September 2021: Compile and publish consolidated GFS for budgetary central government and local governments on a quarterly basis — Responsible: GDP MEF.

*Source: 1khmea2021001 - 20. Source data for the NSSF need further investigation and validation before GFS for the; IMF Cambodia mission document.*

### Appendix II. Implementation of the Previous Mission’s Recommendations

### Appendix II. Implementation of the Previous Mission’s Recommendations

### Outcome: Data are compiled and disseminated using the coverage and scope of the latest manual/guide
- Target Date: May 2020
  - Recommendation: Coordinate and agree on the institutional coverage of the general government and public sector with NIS and NBC
  - Responsible Institutions: GDP MEF, NBC, NIS
  - Implementation Status: Partly Implemented
    - Following the first inter-agency workshop on GG data reconciliation in December 2019, the GDP shared the list of PAEs and SOEs with the NIS and the NBC.
    - A technical meeting was held by the GFS Team on October 14, 2020 with the NIS and the NBC.
    - The second inter-agency workshop on GG data reconciliation was hosted by the MEF during October 26–27, 2020.
    - Further coordinated efforts are needed to agree on institutional units of GG and public sector.
    - The NIS claims using the same data coverage for GG as the MEF. Workshop discussion revealed that only source data for BCG might be used to compile GG accounts in SNA. This issue needs further investigation.
    - According to the NBC’s opinion, the discussion on the institutional coverage should be held in parallel with reconciling data on GG in GFS, MFF, and ESS.

- Target Date: May 2020
  - Recommendation: Bridge the 2018 budget execution reports of PAEs with the GFSM 2014-based formats and compile consolidated GFS for general government
  - Responsible Institutions: GDP MEF
  - Implementation Status: Implemented
    - The GDP’s GFS Team bridged the 2015–2019 budget execution reports for 29 PAEs (including the NSSF) with the GFSM 2014-based formats.
    - The GFS Team confirmed the status of the NSSF as a Social Security Fund and presented its data separately from other PAEs.
    - Consolidated GG GFS for 2018 were compiled and sent to the IMF’s STA in June 2020. This report has to be updated and sent to STAGODATA or uploaded through the ICS.

- Target Date: June 2020
  - Recommendation: Bridge the 2018 financial reports of 11 PAEs with GFSM 2014-based formats and compare the results with GFS based on budget execution data
  - Responsible Institutions: GDP MEF
  - Implementation Status: Partly Implemented
    - The GFS team bridged the 2018 financial reports of 11 PAEs with GFSM 2014-based formats (Statement of Government Operations and Tables 1-3) and reported the working file to the IMF’s STA in June 2020.
    - Further actions are needed to compare results for 11 PAEs with their 2018 GFS based on budget execution, identify discrepancies and propose follow up steps to minimize discrepancies.

- Target Date: July 2020
  - Recommendation: Reconcile GFS on general government financial balance sheet with the NBC statistics (MFS, BOP/IIP) on an annual basis by comparing data, identifying differences, reconciling and explaining the reasons for differences in a note of reconciliation
  - Responsible Institutions: GDP MEF, NBC
  - Implementation Status: Partly implemented
    - A technical meeting was held by the GFS Team on October 14, 2020 with the NIS and the NBC, and the second inter-agency workshop on GG data reconciliation was hosted by the MEF during October 26–27, 2020.
    - Reconciliation tables were populated with GG 2018 data in GFS, MFS, and BOP/IIP. Discrepancies identified will serve as a basis to further discuss data consistency, reconcile the numbers, and explain the reasons for remaining differences in a note of reconciliation.

- Target Date: July 2020
  - Recommendation: Reconcile GFS on general government with the NIS (Totals for Saving, Net investment in NFAs, and Net Lending/Borrowing) annually by comparing, identifying differences, reconciling and explaining the reasons in the note of reconciliation
  - Responsible Institutions: GDP MEF, NIS
  - Implementation Status: Partly implemented
    - A basic reconciliation table was populated with GG 2018 data for Saving, Net investment in NFAs, and Net Lending/Borrowing in GFS. Only amount for GG Saving was presented by the NIS.
    - The NIS provided numbers to cross-check selected GFS items for revenue, expense and a total for net acquisitions of NFA.
    - Differences reveal different coverage used by the NIS for GG accounts (BCG instead of consolidated BCG and LG).

- Target Date: October 2020
  - Recommendation: Bridge the 2019 budget execution reports of PAEs with GFSM 2014-based formats, compile consolidated GFS for general government including GFS balance sheet (Table 6) and report them to STA and APD
  - Responsible Institutions: GDP MEF
  - Implementation Status: Partly Implemented
    - The GDP’s GFS Team bridged the 2015–2019 budget execution reports for 29 PAEs (including the NSSF) with the GFSM 2014-based formats and confirmed NSSF status as a Social Security Fund, presenting its data separately.
    - Consolidated GFS for 2019 covering BCG, EBUs (PAEs), SSF (NSSF) and LG were submitted to the IMF (Statement of Government Operations, Tables 1-3).
    - After review, the IMF’s STA decided to consider data for SSF as a work in progress due to serious data issues; SSF will be published by STA as NA for the time being.
    - A meeting with the NSSF was planned before the end of 2020 to work on data issues.
    - Further actions are needed to enhance source data for PAEs to compile GFS balance sheet (Table 6) for PAEs and the whole GG. Only 11 PAEs are currently presenting financial reports to the MEF (GDNT); these procedures need reinforcement.

- Target Date: October 2020
  - Recommendation: Publish 2015–2018 consolidated balance sheet (Table 6) for budgetary central government and local governments as part of GFS on the MEF website
  - Responsible Institutions: GDP, MEF
  - Implementation Status: Not Implemented
    - The GDP compiles financial balance sheet on a pilot basis (by October 2020, pilot balance sheets for 2015–2018 were available) but did not start reporting it to STA and APD or publish on the MEF web site.
    - Intention is to further improve data quality and validate results with source data providers in the MEF (GDNT and GDICDM) and the NBC (in terms of GG data in MFS and IIP).
    - Main discrepancies relate to debt, on-lending loans, and acquisitions of nonfinancial assets and arise from different exchange rates applied by different source data providers (GDNT and GDICDM). One technical meeting was held with GDNT, GDICDM, and the National Accounting Council.

- Target Date: November 2020
  - Recommendation: Perform internal reconciliation on an annual basis to ensure data consistency between query-based and posted data, different source data on loans and on-lending loans, acquisition of nonfinancial assets financed from abroad, and debt liabilities.
  - Responsible Institutions: GDNT, GDICDM, GDP MEF
  - Implementation Status: To include in the updated Action Plan.

- Target Date: December 2020
  - Recommendation: Form a working group on reconciling GFS with data on general government in other datasets of macroeconomic statistics (NBC and NIS)
  - Responsible Institutions: GDP MEF
  - Implementation Status: To include in the updated Action Plan.

### Outcome: Data are compiled and disseminated using the classification of the latest manual/guide
- Target Date: August 2020
  - Recommendation: Review source data for GFS COFOG (Table 7) for budgetary central government expenditure (expense and net acquisition of nonfinancial assets) to comply with consistency with GFSM 2014 recommendations
  - Responsible Institutions: GDP, GDB, MEF
  - Implementation Status: Implemented
    - On September 4, 2020, the GDP hosted a webinar discussing international experiences in compiling COFOG.
    - Internal MEF technical meeting (GDP, GDNT, GDB, and the FMIS Team) took place on September 10, 2020; followed by additional COFOG discussions on September 14, 2020 and a COFOG consultation and input collection workshop for line ministries hosted by the MEF during December 22–23, 2020.
    - Mapping of sub-programs with COFOG codes is performed by LMs and reported to the MEF’s GDB for review and uploading into the FMIS. Programs, sub-programs, and activities of 34 ministries/institutions (BCG) are mapped with COFOG codes at the level of sub-programs.
    - The GDB provides methodological advice to LMs on mapping specific sub-programs. The mapping for current expense has been uploaded into FMIS.
    - The FMIS generates three forms of COFOG reports for BCG: (i) Functional Analysis of Government Expenditure (Original Budget, Modified Budget, Actual Expenditure, and percentage share of Actual Expenditure in Modified Budget by detailed COFOG codes); (ii) Government Expenditure Summary by Functions (same by COFOG Divisions); and (iii) Analysis of Functional Expenditure by Ministries (same by COFOG Divisions and LMs).
    - Remaining issues:
      - Mapping one sub-program to several COFOG codes in the FMIS (shares for splitting reported by LMs but cannot be uploaded until technical issues are solved by the FMIS Team).
      - Validating by LMs the COFOG reports generated from the FMIS (lack of formalized procedures for validation).
      - Reconciling totals for current expense by COFOG with the total for GFS Table 2 (important discrepancies remain).
      - Mapping internally financed capital expenditure is work-in-progress (disposals of NFA are not taken into consideration).
      - Mapping externally financed expenditure needs initiation in cooperation with the GDB and GDICDM using source data from donors (need for strong formal procedures to receive donor source data).
    - Financial reports of PAEs are based on economic classification. Current focus of the GDB is on COFOG for BCG and LG.
    - COFOG classification for LG is work in progress. Time schedule for performance budgeting implementation at all 24 provinces is 2020 (2021 for Phnom Penh). Currently, only 18 provinces from 25 implement program budgeting and have programs that can be mapped to COFOG. There are four programs at the LG level: Economic Development, Social Affairs Improvement, Public Security and Safety Enhancement, and General Administration Promotion.

- Target Date: October 2020
  - Recommendation: Compile annual GFS COFOG (Table 7) for budgetary central government expenditure (expense and net acquisition of nonfinancial assets) in line with GFSM 2014 recommendations
  - Responsible Institutions: GDP, MEF
  - Implementation Status: Not Implemented
    - Available source data are for BCG current expense only.
    - Responsibilities for compiling detailed COFOG data and reporting it to the IMF, FAO, OECD and other international organizations should be specified more clearly.

- Target Dates and Recommendations to include in updated Action Plan (November 2020 onward):
  - Develop proposal to GDB to determine budget deficit in accordance with GFSM 2014 — Responsible: GDB, GDNT, GDP MEF.
  - Generate and review GFS Table 2 (Expense) for budgetary central government from FMIS, make necessary corrections of mapping CoA to GFS in FMIS — Responsible: GDP and FMIS Team MEF.
  - Generate and review GFS Table 2 (Expense) for local governments from FMIS, make necessary corrections of mapping CoA to GFS in FMIS — Responsible: GDP and FMIS Team MEF.
  - Prepare the first draft of documentation on business-process for GFS compilation and dissemination — Responsible: GDP MEF.
  - Generate and review GFS Table 3 (Transactions in Assets and Liabilities) for budgetary central government from FMIS, make necessary corrections of mapping CoA to GFS in FMIS — Target Date: August 2021; Responsible: GDP, GDICDM, GDNT MEF.
  - Generate and review GFS Table 3 (Transactions in Assets and Liabilities) for local governments from FMIS, make necessary corrections of mapping CoA to GFS in FMIS — Target Date: August 2021; Responsible: GDP and GDNT, MEF.

### Outcome: Higher frequency data has been compiled and disseminated internally and/or to the public
- Target Date: May 2020
  - Recommendation: Establish regular reporting to the Joint World Bank–IMF quarterly PSDS database to publish PSDS for Cambodia
  - Responsible Institutions: GDP and GDICDM, MEF
  - Implementation Status: Implemented
    - Quarterly PSDS for Cambodia were published in the Joint World Bank–IMF database.
    - The MEF’s GDP submits quarterly PSDS for the database on a semi-annual basis following the date of the national publication.
    - Regular reporting procedures for quarterly PSDS need further enhancement to clearly specify the GDP’s responsibilities for reporting to the Joint World Bank–IMF quarterly PSDS database in close cooperation and coordination with the GDICDM as source data provider.
    - Further work is needed to expand institutional and data coverage for quarterly PSDS.

- Target Date: May 2020
  - Recommendation: Update the derivation table to present the derivation of aggregates from TOFE to GFS and post it on the MEF website
  - Responsible Institutions: GDP MEF
  - Implementation Status: Implemented
    - Derivation table from TOFE to GFS updated and posted on the MEF website.

- Target Date: May 2020
  - Recommendation: Add explanation on the differences between TOFE and GFS and advantages of using GFS in fiscal analysis on the MEF website
  - Responsible Institutions: GDP MEF
  - Implementation Status: Partly Implemented
    - Explanation on the differences between TOFE and GFS and advantages of using GFS in fiscal analysis was prepared but not published on the MEF website.

- Target Date: September 2021
  - Recommendation: Compile and publish consolidated GFS for budgetary central government and local governments on a quarterly basis
  - Responsible Institutions: GDP MEF
  - Implementation Status: To include in the updated Action Plan.

---

### Appendix III. GFS Classification of COVID-19 Related Fiscal Interventions in Cambodia

- Section A. Increased Healthcare Spending — GFS classification instructions
  - Government Intervention: Anti-COVID-19 Master Plan, including virus testing, containment, and treatment
    - GFS Classification mappings:
      - 21 Compensation of employees
        - In case of hiring additional workers as government employees or increasing spending on existing healthcare workers who are government employees.
      - 22 Use of goods and services
        - Payments for healthcare workers in case they are not government employees and the government is buying their services from private healthcare contractors.
        - Virus testing when government is buying this service from private healthcare contractors.
        - Medical supplies (antiviral masks, antiseptics, pharmaceuticals) and other operational expense in government hospitals.
        - Constructions that do not meet the definition of a fixed asset (such as temporary tents used for testing, which are not intended to be used for multiple years).
      - 2632 Grants to other general government units, Capital
        - In case a government unit is making a payment to another government unit, who will construct/purchase the asset and become the economic owner of that asset.
      - 2822 Transfers n.e.c., Capital
        - In case a government unit is making a payment to a unit/entity outside general government, who will construct/purchase the asset and become the economic owner of that asset.
      - 3111 Net Investment in Nonfinancial Assets, Buildings and structures
        - Construction of new health facilities (including quarantine facilities and new or extended medical facilities) that meet the definition of a fixed asset when the government unit who will construct/purchase the asset will become the economic owner of that asset.
      - 3112 Net Investment in Nonfinancial Assets, Machinery and equipment
        - Acquisition of medical machinery and equipment (such as respiratory ventilators).

- Section B. Provision of Assistance to Households — GFS classification instructions
  - 1. Monthly cash transfer program for poor and vulnerable households
    - Description: A social protection program related to the COVID-19 crisis introduced by the Royal Government in June 2020 to support the daily livelihoods of poor and vulnerable families across the country holding Equity Cards, further paying great attention to the children below five years old, people with disabilities, old people aged 60 and over and the people living with HIV in those poor families.
    - GFS Classification: 272 Social assistance benefits
      - Current transfers to households paid directly from the budget (i.e., not through the National Social Security Fund) to provide for the needs arising from events or circumstances adversely affecting the welfare of the households concerned either by imposing additional demands on their resources or by reducing their income.
      - Similar transfers paid through the NSSF would be treated as Social security benefits (GFS 271).

  - 2. Cash-for-work program
    - Description: In May 2020 the Royal Government decided to extend the coverage and amount of the budget for the cash-for-work program for those who have lost employment from the factories/enterprises and returned home from the foreign countries, to support the local people's living standards, and to bring about socio-economic achievements through the construction of small local physical infrastructures to enhance the agricultural and economic sectors. Implemented by line ministries.
    - GFS Classification:
      - 22 Use of goods and services
        - Payments in cash to people who are not government employees for work on maintaining, repairing or rehabilitating community assets such as irrigation canals, drinking water supply systems, and forestry. These payments do not relate major renovations, constructions and reconstructions of government’s nonfinancial assets.
      - 3111 Net Investment in Nonfinancial Assets, Buildings and structures
        - Major renovation, construction or reconstruction of infrastructure or other type of nonfinancial assets when the government unit who is paying for work will become the economic owner of the nonfinancial asset and reflect it in the government’s balance sheet. Payments to people participating in this work will constitute part of the total cost of the nonfinancial asset in the government’s balance sheet.

  - 3. Wages subsidies and skill training programs
    - Description: Government provides training programs through vocational training institutions and contributes 20% to the mandate minimum wage to workers and employee who are working for hotels, guesthouses, restaurants and travel agencies operating in Phnom Penh, Siem Reap, Sihanouk, Kep, Kampot, Bavet and Poipet.
    - GFS Classification:
      - 272 Social assistance benefits
        - Payments to unemployed people who completed skill training programs. Wage subsidy payment in case the predominant intent of this payment to support the income of the worker (for instance, when the employer suspends the work), and the employer is largely acting as a conduit for the payment. These benefits are paid directly from the main budget (i.e., not through the NSSF).
      - 2821 Transfers n.e.c., Current
        - Payments to training institutions for providing skill training services to unemployed people in case these institutions are not general government units. In case a training institution belongs to general government its expense should be classified under relevant economic categories such as Compensation of employees (GFS 21), Use of goods and services (GFS 22), Consumption of fixed capital (GFS 23), etc.

- Section C. Relaxation of Tax Obligations for Households and Corporations
  - (Content truncated in source.)

*Source: Appendix II. Implementation of the Previous Mission’s Recommendations; Appendix III. GFS Classification of COVID-19 Related Fiscal Interventions in Cambodia (extracted from the provided IMF PDF).*

### 1. Corporate income tax and monthly taxes exemptions for hotels, guesthouses, restaurants and travel agencies operating 

### 1. Corporate income tax and monthly taxes exemptions for hotels, guesthouses, restaurants and travel agencies operating in Phnom Penh, Siem Reap, Sihanouk, Kep, Kampot, Bavet and Poipet; tax waiving on transfer tax for any purchases below 70,000 USD from licensed property developers; tax waiving for Cambodian-registered airlines; lower withholding tax on the loans of banks and financial institutions from both local and overseas sources

### Tax measures and GFS classification
- Corporate income tax and monthly tax exemptions for hotels, guesthouses, restaurants and travel agencies operating in Phnom Penh, Siem Reap, Sihanouk, Kep, Kampot, Bavet and Poipet.
- Tax waiving on transfer tax for any purchases below 70,000 USD from licensed property developers.
- Tax waiving for Cambodian-registered airlines.
- Lower withholding tax on the loans of banks and financial institutions from both local and overseas sources.
- GFS treatment: reflected as a reduction in the expected revenue under the relevant tax category; impact reflected in taxes actually collected after changes in tax scheme rules; specific amounts could be recorded as memorandum items.
- Relevant GFS notes/codes:
  - 11 Taxes — reflected as reduction in expected revenue.
  - 1422 Other revenue, Administrative fees — classification guidance when payments are for licenses/fees (contrast with GFS 1145 when fees are out of proportion to cost).

### Non-payment to NSSF for tourism businesses
- Non-payment to the National Social Security Fund (NSSF) allowed for tourism businesses during the business suspension.
- GFS classification:
  - 121 Social security contributions — reflected as a reduction in compulsory social security contributions to the NSSF, which is part of the general government sector.
  - Note: According to the GFSM 2014, social contributions are treated separately from taxes.

### Fee deferrals and license fee exemptions
- Fee deferral of civil aviation fee.
- Exemptions from the renewal fees for tourism licenses of all types.
- GFS classification:
  - 1422 Other revenue, Administrative fees — reflected as a reduction in fees for compulsory licenses and other administrative fees; fees considered a sale of a service when issuing the license implies a regulatory function.
  - If a payment is clearly out of proportion to cost, classify as Taxes on use of goods and on permission to use goods or perform activities (GFS 1145).

### Provision of financial assistance to corporations — wage subsidies
- Government contributes 20% to the mandate minimum wage to workers and employee who are working for hotels, guesthouses, restaurants and travel agencies operating in Phnom Penh, Siem Reap, Sihanouk, Kep, Kampot, Bavet and Poipet.
- GFS classification:
  - 25 Subsidies — where predominant intent is to support the employer (not its workers) and ensure a quick return to full production after the end of the crisis.

### Special financing schemes: ARDB and SME Bank (provision, co-financing, and capital treatment)
- Following the government’s decision, the ARDB and the SME Bank provide low-interest loans to SMEs in priority sectors such as tourism, garments, construction, transportation, medical device, and pharmacy.
- GFS classifications and options depending on government relationship and contracts:
  - 25 Subsidies — if ARDB and SME Bank are public corporations running recurrent deficits as a matter of government policy and deficits are covered by government transfers.
  - 2822 Transfers n.e.c., Capital — if government makes investments in public corporations without expectation of a realistic rate of return or without receiving anything of equal value.
  - 3204 Net acquisition of financial assets, Loans — in case of government lending to ARDB and SME Bank with evidence of a contractual financing agreement (recording not influenced by concessionality).
  - 3205 Net acquisition of financial assets, Equity — without a specific financing agreement and with evidence government can expect a realistic return on its investment; payments treated as acquisition of equity even if no new shares issued. Payments can be partitioned between GFS 3205 and 2822 in some cases (e.g., equity injections above market price).

### Credit Guarantee Fund
- The MEF allocated additional financing into the Credit Guarantee Fund, which guarantees loans provided by banks.
- GFS guidance:
  - Guarantees are contingent liabilities and generally recorded as memorandum items for fiscal risk management.
  - 1422 Other revenue, Administrative fees — if government receives fees for provision of guarantees.
  - 3304 Net incurrence of liabilities, Loans — if government provides a guarantee where there is a very high likelihood it will be regularly called, the entire amount should be treated from inception as debt assumption by government.
  - Memorandum item — guarantees typically recorded as memo items since contingent liabilities are not recorded as government debt or transactions within GFS.

### Memoranda and recording practice
- Several measures noted as memorandum items where contingent liabilities or specific amounts may be recorded separately for fiscal risk management and transparency purposes.

### Appendix IV — Proposals for the GFS Questionnaire in the PFM Q4 2020 Progress Report: Importance of GFS
- Key benefits of using GFSM 2014-based framework:
  - i. GFS meet globalization demands and provide internationally comparable fiscal data to detect vulnerabilities and take timely corrective measures.
  - ii. GFS produce summary information on overall performance and financial position of the general government using balancing items such as the net operating balance, net lending/net borrowing, and change in net worth.
  - iii. GFS contain comprehensive information for fiscal policy analysis, formulation, and monitoring in accordance with "Better Data Better Policy".
  - iv. GFS support monitoring and evaluating implementation of the Sustainable Development Goals (SDGs 2030), and assessing specific fiscal policy measures (government lending, subsidies, social spending, investment, environmental protection).
  - v. GFS enhance analysis of government’s contribution to macroeconomic developments and fiscal policy objectives (macroeconomic stability, efficient resource allocation, redistribution, service delivery).
  - vi. GFS integrate economic flows with balance sheet positions for systematic evaluation of long-term fiscal sustainability.
  - vii. GFS provide inputs for other macroeconomic statistics (national accounts, balance of payments and international investment position, monetary and financial statistics).
  - viii. GFS serve as a bridge to align budgeting and accounting with macroeconomics to support interaction between economists, accountants, and policy makers.

### Appendix IV — How GFS contributes to strengthening PFM
- GFS contributions to PFM:
  - i. GFS reporting is an integral part of public fiscal reporting in Cambodia (with budget and financial reporting) and an important element of the PFM system.
  - ii. GFS provide indicators to support the Transparency Architecture Codes and ensure government’s accountability for fiscal performance and efficient use of public resources.
  - iii. GFS contain detailed information on government balance sheets and changes in nonfinancial assets, financial assets, liabilities and net worth to support PFM and balance sheet analysis.
  - iv. GFS framework improves oversight of SOEs and management of fiscal risks by providing structured data on guarantees, subsidies, capital transfers, policy lending, and equity injections.
  - v. GFS include data on fiscal flows between government levels and support assessment of fiscal decentralization.
  - vi. Assessment of GFS elements is part of international PFM diagnostic tools (PEFA, Fiscal Transparency Evaluation, Open Budget Survey, etc.).

### Appendix IV — Main challenges in improving GFS quality
- Identified challenges:
  - i. Absence of formal provisions assigning responsibility and authority for GFS and PSDS; need to formalize GDP’s responsibilities for collecting, processing, and disseminating GFS and PSDS, including quarterly PSDS and GFS with balance sheets and COFOG detail.
  - ii. Absence of detailed source data for extrabudgetary units (PAEs); limited source data for PAEs, especially NSSF, with only aggregates on transactions; need to reinforce accounting and reporting for PAEs.
  - iii. Absence of detailed source data for public corporations; GFS should cover overall public sector including public financial and non-financial corporations but detailed source data are not available.
  - iv. Limited data sharing and coordination among statistics-producing agencies and knowledge gaps; recommendation for a formal Memorandum of Understanding among MEF, NBC, and NIS and a technical working group for reconciliation.
  - v. Lack of resources and support infrastructure: limited staff, facilities, computing resources; only two economists are assigned with GFS; need additional resources and technical documentation (guidelines).
  - vi. Lack of understanding advantages of GFSM 2014 in fiscal analysis and policy making; reliance on traditional budgeting, absence of comparative time series and explanations complicate implementation.
  - vii. Limited GFS and PSDS scope: current GFS cover transactions only, COFOG absent; PSDS covers loans and debt securities for BCG; dissemination of pilot financial balance sheets for 2015–2018 covering BCG and LGs is pending; data quality needs improvement and cross-checking; compilation of financial balance sheets for PAEs complicated — only 11 PAEs from 29 present financial reports to MEF with a two-year lag; main COFOG challenges include covering all capital expenditure including externally financed projects and estimating COFOG for local governments and PAEs.

### Appendix IV — Main directions for GFS implementation
- Proposed directions:
  - i. Enhance cooperation between statistics-producing agencies; coordinate coverage of general government and public sector; reconcile data across GFS, national accounts, external sector statistics, and monetary and financial statistics; explain remaining differences.
  - ii. Improve quality of source data for GFS and PSDS, including accounting and reporting for PAEs, externally financed projects, and SOEs.
  - iii. Expand scope of annual GFS to include all transactions, other economic flows and balance sheet positions for general government, including detailed functional classification and counterpart sectors.
  - iv. Develop and disseminate additional explanations on advantages of using GFSM-2014 in fiscal analysis and policy making; develop proposals to determine budget deficit in accordance with GFSM 2014.
  - v. Formalize responsibility and authority for collection, processing, and dissemination of GFS and PSDS in line with international standards.
  - vi. Coordinate GFS and PSDS developments with the PFM Reform Agenda.

*Source: 1khmea2021001 - 1. Corporate income tax and monthly taxes exemptions for hotels, guesthouses, restaurants and travel agencies operating (PDF).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1khmea2021001.pdf_