## Press Release: IMF Approves Second Annual Loan for Cambodia under ESAF

_IMF News, September 15, 1995_

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**Canonical URL:** [Press Release: IMF Approves Second Annual Loan for Cambodia under ESAF](https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9547)

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## Bibliographic details
- Published: September 15, 1995

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### Loan approval and terms
- The IMF approved the second annual loan for Cambodia under the enhanced structural adjustment facility (ESAF) equivalent to SDR 28.0 million (about $41 million).
- The loan is in support of the Government's 1995-96 macroeconomic and structural adjustment program.
- The loan will be disbursed in two equal semi-annual installments, the first of which is available immediately.
- ESAF terms: interest rate of 0.5 percent; repayable over 10 years, with a 5-1/2-year grace period.

### Recent macroeconomic performance (background)
- Cambodia is gradually emerging from years of internal strife; international community efforts, including IMF involvement, have helped bring a measure of stability.
- Output growth in 1994: 4 percent, lower and less balanced than expected due to a sharp weather-related drop in rice production.
- Consumer prices rose 18 percent during 1994 (double the program target), largely because of a sharp rise in food prices.
- Inflation subsided to an annual rate of less than 10 percent in early 1995 following partial stabilization of food prices and continued fiscal and monetary restraint.
- Fiscal results for 1994:
  - Current fiscal deficit: 1-1/2 percent of GDP in 1994.
  - Strong revenue performance and tight controls over nondefense spending offset significant overruns in security and defense spending.
- Exchange rate: stability evident after wide fluctuations of previous years.

### 1995-96 program objectives and targets
- Main goals:
  - Raise output growth to an annual rate of about 7 percent between 1995-97.
  - Reduce inflation to less than 8 percent by mid-1996 and to 5 percent by 1997.
  - Increase official reserves to the equivalent of 2-1/4 months of imports by mid-1996.
- Fiscal targets:
  - Current fiscal deficit targeted at 1-1/2 percent of GDP in 1994, and 3/4 percent in 1996.
  - Aim to broaden the tax base to durably increase the revenue-GDP ratio.
  - Contain military spending at below 6 percent of GDP, with a further reduction expected for 1996 in the context of a military reform.
- Monetary policy measures:
  - Plans, with IMF technical assistance, for issuance of treasury bills in late 1995 to establish a market-determined interest rate for the riel.
  - Rationale: high level of dollarization and very limited use of the national currency in the banking system.

### Structural reforms
- Key reform areas: financial sector, civil service, military, and public enterprises.
- Financial sector:
  - Reinforce regulation and supervision with IMF technical assistance.
  - Strengthen legal basis for regulation and supervision via a new central banking law.
- Public administration and enterprises:
  - Civil service reductions: number of civil service employees to be reduced by 10 percent by end-1996, with an additional 10 percent reduction by end-1997.
  - Privatization: a privatization law adopted in December 1994; a review of activities of leased public enterprises is about to be completed to pave way for sale of assets to the private sector.
  - Remaining public enterprises: individual rehabilitation programs in 1995 and 1996 to include elimination of public transfers and credit from the National Bank, and only limited availability of credit from commercial banks.

### Social and environmental issues
- Social protection:
  - Limited public resources constrain development of a broad social safety net.
  - Government will prepare a poverty assessment program based on a recently completed socioeconomic survey to inform expenditure decisions affecting vulnerable groups.
- Environmental measures:
  - Authorities committed to avoiding an environmentally unsustainable rate of logging; working on a forest management code.
  - Interim measure: ban on logging exports since May 1995.
  - National Protected Areas System under development covering 3.3 million hectares designated for national parks, wildlife sanctuaries, protected areas, and multiple-use-management areas.

### Challenges and policy priorities ahead
- Consolidation of macroeconomic gains will require:
  - Perseverance in maintaining financial discipline.
  - Improving transparency in government transactions.
  - Containing fiscal pressures, notably those arising from high levels of defense and security spending.
- Security situation remains unstable and constrains reform implementation.

### IMF membership, quota, and obligations
- Cambodia joined the IMF on December 31, 1969.
- Quota: SDR 65.0 million (about $96 million).
- Outstanding financial obligations to the IMF: equivalent of SDR 34 million (about $50 million).

### Cambodia: Selected Economic Indicators
- Real GDP growth:
  - 1992: 7.0
  - 1993: 4.1
  - 1994: 4.0
  - 1995*: 7.5
  - 1996**: (projected) [no value provided in source beyond 1995* projection]
- Consumer price index (percent change):
  - 1992: 112.5
  - 1993: 41.0
  - 1994: 18.0
  - 1995*: 8.7
  - 1996**: 5.0
- Current budget balance (deficit –) (percent of GDP):
  - 1992: –4.3
  - 1993: –1.4
  - 1994: –1.5
  - 1995*: –0.6
- Gross official reserves (months of imports):
  - 1992: 1.0
  - 1993: 1.8
  - 1994: 1.4
  - 1995*: 2.1
  - 1996**: 2.8
- Sources noted in release: Cambodian authorities; and IMF staff estimates and projections.
- *Program.
- **Projected

*Press Release No. 95/47 — September 15, 1995.*

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## References

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_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9547_