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Dyna Heng, Serey Chea, and Bomakara Heng
Interest rate caps, despite their intended objective of broadening financial inclusion, can have undesirable effects on financial inclusion under certain conditions. This paper examines the effect of microfinance-loan interest rate caps on financial inclusion in Cambodia. Based on a difference-in-difference analysis on bank and microfinance supervisory data, results show some unintended impact on financial inclusion. The cap led to a significant increase in non-interest fees charged on new loans following the introduction of an annual cap. Microfinance borrowers declined immediately, amid an increase in credit growth, as microfinance institutions targeted larger borrowers at the expense of smaller ones. Microfinance institutions, responded differently to the cap, considering their own operation and funding costs, and client base. Two years after the cap, institutions resumed lending to a wider group of borrowers with lower funding and operation costs brought by mobile payment development.
International Monetary Fund. Statistics Dept.
As 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),1 this mission conducted an in-country workshop (December 2–4, 2019) and provided follow-up technical assistance (TA) on GFS and PSDS (December 5–13, 2019).2 Both activities were aimed at strengthening compilation and dissemination of fiscal data in line the GFS Manual 2014 (GFSM 2014) and the PSDS: Guide (PSDSG) to support surveillance and decision making. At the request of the authorities, the TA mission participated in the inter-agency workshop on data consistency in macroeconomic statistics conducted by the Ministry of Economy and Finance (MEF) during December 5–6, 2019.
Mr. Geoffrey J Bannister, Mr. Jarkko Turunen, and Malin Gardberg
Despite significant strides in financial development over the past decades, financial dollarization, as reflected in elevated shares of foreign currency deposits and credit in the banking system, remains common in developing economies. We study the impact of financial dollarization, differentiating across foreign currency deposits and credit on financial depth, access and efficiency for a large sample of emerging market and developing countries over the past two decades. Panel regressions estimated using system GMM show that deposit dollarization has a negative impact on financial deepening on average. This negative impact is dampened in cases with past periods of high inflation. There is also some evidence that dollarization hampers financial efficiency. The results suggest that policy efforts to reduce dollarization can spur faster and safer financial development.
International Monetary Fund. Independent Evaluation Office


This evaluation assesses the IMF’s work on countries in fragile and conflict-affected situations (FCS), addressing both (i) its engagement through surveillance, lending, and capacity development and (ii) the frameworks and procedures for its engagement. It finds that the IMF has provided unique and essential services to FCS to restore macroeconomic stability and rebuild core macroeconomic institutions as prerequisites for state building, playing a role in which no other institution can take its place. In this critical role, it is broadly acknowledged to have had a high impact. While the IMF has provided relatively little direct financing, it has catalyzed donor support through its assessment of a country’s economic policies and prospects. Notwithstanding this positive assessment, the IMF’s overall approach to its FCS work seems to have been conflicted. Not only has it failed consistently to make hard choices necessary to achieve full impact from its engagement in countries where success requires patient and dedicated attention over the long haul, but past efforts have not been sufficiently bold or adequately sustained, and the staff has tended to revert to treating fragile states using IMF-wide norms, rather than as countries needing special attention. The report proposes six recommendations to improve the effectiveness of the IMF’s FCS work: (i) to issue a statement of high-level commitment to FCS work for IMFC endorsement; (ii) to create an effective institutional mechanism with the mandate and authority to coordinate and champion such work; (iii) to develop comprehensive strategies for individual FCS; (iv) to adapt its lending toolkit to deliver more sustained financial support to FCS; (v) to take practical steps to increase the impact of its capacity development support to FCS; and (vi) to take steps to incentivize high-quality and experienced staff to work on individual FCS and find pragmatic ways of increasing field presence in high risk locations.

International Monetary Fund. Asia and Pacific Dept
This 2017 Article IV Consultation highlights 6.9 percent expected growth in Cambodia’s economy in 2017, with moderating private investment offset by higher public spending and robust construction and tourism activities. Headline inflation rose to 3 percent in 2016 and 3.5 in the first half of 2017, driven mainly by higher food and energy prices. Overall credit growth has slowed, owing in part to policy measures. Real estate sector–related bank credit growth, however, remains strong, supported by demand for housing from Cambodia’s young and growing middle-income population. Real GDP growth is projected to remain robust over the next few years.
International Monetary Fund. Asia and Pacific Dept
This 2016 Article IV Consultation highlights growth in the Cambodian economy of about 7 percent in 2015, supported by strong garment exports, real estate and construction activity, and a reduction in oil prices. Inflation unexpectedly picked up at the end of 2015, to 2.8 percent, owing to higher food prices following extreme weather, but it remains well contained. Private sector credit growth has averaged nearly 30 percent over the past three years, doubling the credit-to-GDP ratio to 62 percent by the end of 2015. The near-term outlook remains broadly favorable. Growth is projected to remain robust at about 7 percent for 2016–17, supported by strong garment exports and real estate and construction activity.
International Monetary Fund. Asia and Pacific Dept
This 2015 Article IV Consultation highlights that economic activity in Cambodia remained strong with a growth rate at 7 percent in 2014, notwithstanding appreciation of the real effective exchange rate following U.S. dollar strengthening and growing competition from other low-cost garment producers. Inflation fell in 2014 and through 2015, owing to strong external disinflationary pressures from lower food and oil prices. The short-term outlook remains broadly favorable. Growth is projected to remain robust at 7 percent in 2015, while inflation is projected to rise gradually to about 2 percent by end-2015. The fiscal deficit is projected to rise modestly to 2 percent in 2015 as a result of strong measures to improve revenue administration.