Front Matter Page
© 2001 International Monetary Fund
February 2001
IMF Country Report No. 01/35
Cambodia: Second Review Under the Poverty Reduction and Growth Facility—Staff Report; Staff Statement; News Brief on the Executive Board Discussion; and Statement by Authorities of Cambodia
In the context of the second review under the Poverty Reduction and Growth Facility, the following documents have been released and are included in this package:
the staff report for the second review under the Poverty Reduction and Growth Facility, prepared by a staff team of the IMF, following discussions that ended on October 28, 2000, with the officials of Cambodia on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on January 3, 2001, The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
a staff statement of January 19, 2001 updating information on recent economic developments.
a News Brief summarizing the views of the Executive Board as expressed during its January 19, 2001, discussion of the staff report that completed the review.
a statement by the authorities of Cambodia.
The document(s) listed below have been or will be separately released.
Interim Poverty Reduction Strategy Paper
Joint Staff Assessment of the Interim Proverty Reduction Strategy Paper
Letter of Intent by the authorities of the member country
Memorandum of Economic and Financial Policies by the authorities of the member country
Technical Memorandum of Understanding
The policy of publication of staff reports and other documents by the IMF allows for the deletion of market-sensitive information.
To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to Publicationpolicy@imf.org.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
700 19th Street, N.W. • Washington, D.C. 20431
Telephone: (202) 623 7430 • Telefax: (202) 623 7201
E-mail: publications@imf.org • Internet: http://www.imf.org
Price: $15.00 a copy
International Monetary Fund
Washington, D.C.
Front Matter Page
INTERNATIONAL MONETARY FUND
CAMBODIA
Second Review Under the Poverty Reduction and Growth Facility
Prepared by the Asia and Pacific Department and Policy Development and Review Department
(In consultation with the Fiscal Affairs, Legal, Monetary and Exchange Affairs, Statistics and Treasurer’s Department)
Approved by R. Anthony Elson and Mark Allen
January 3, 2001
A staff team visited Phnom Penh during October 16–28 to conduct the second review under the PRGF arrangement. The team consisted of Messrs. Rumbaugh (head), Marciniak, Ishi (all APD), Ms. Sun (EP-APD), Mr. Adachi (PDR), and Ms. Jupp (Administrative Assistant, APD). The mission was assisted by Mr. de Zamaróczy (Resident Representative) and worked jointly with a World Bank mission on civil service reform, expenditure management, and governance issues, and with an MAE mission on bank restructuring.
The mission met with H.E. Keat Chhon, Senior Minister and Minister of Economy and Finance, H.E. Sok An, Senior Minister in charge of the Council of Ministers; H.E. Chea Chanto, Governor of the National Bank of Cambodia; and other senior officials.
A three-year PRGF arrangement for SDR 58.5 million (67 percent of quota) was approved by the Executive Board on October 22, 1999. The first review under the arrangement, together with the 2000 Article IV consultation, was concluded on September 15, 2000. The staff report was released under the policy for the voluntary release of Article IV consultation reports. The authorities have also agreed to have the current report published as well as the I-PRSP and Joint Staff Assessment.
This report was prepared by the staff team under the direction of Mr. Rumbaugh.
Contents
Executive Summary
I. Introduction
II. Performance Under the Program in 2000
III. Policy Discussions and the Program for 2001
A. Poverty Reduction Strategy and Medium-Term Objectives
B. Fiscal Policy
C. Monetary Policy and Bank Restructuring
D. External Sector Policies and Capacity to Repay the Fund
E. Other Structural Reforms
F. Economic Statistics and Fiscal Transparency
G. Implementation Capacity and Program Monitoring
IV. Staff Appraisal
Text Boxes
1. Effects of the Flooding
2. The 2001 Budget
3. Reform of the Tax Incentive System for Investment
4. Pilot Military Demobilization Program
5. Banking Reform
Charts
1. Selected Economic Indicators, 1997–2000
2. Indicators of Program Performance 1997–2001
3. Consumer Prices and Exchange Rate Developments, 1994–2000
Tables
1. Selected Economic Indicators, 1997–2001
2. Quantitative Performance Criteria and Benchmarks, 2000
3. Key Structural Policy Actions for 1999–2000
4. General Government Operations, 1997–2001
5. Monetary Survey, 1999–2001
6. Summary Accounts of the National Bank of Cambodia, 1999–2001
7. Balance of Payments, 1997–2001
8. Medium-Term Macroeconomic Framework, 1997–2005
9. Indicators of Fund Credit, 1998–2013
10. Proposed Schedule of Remaining Disbursements Under the PRGF Arrangement, 2000–2002
Annexes
1. Fund Relations
2. Relations with the World Bank Group
3. Relations with the Asian Development Bank
4. Technical Assistance and Technical Cooperation Action Plan (TCAP)
5. Statistical Issues
Executive Summary
Background: Cambodia’s performance during the first year under the PRGF arrangement was generally successful. Economic growth resumed, inflation was moderate, government revenue mobilization improved, and fiscal balance was restored. All quantitative and structural performance criteria under the arrangement were observed. Structural reforms were implemented broadly as programmed, including notable progress in forestry policy and in bank restructuring.
Economic Prospects: Economic recovery was interrupted in the second half of 2000 by severe flooding. With substantial damage to crops, economic growth for 2000 is estimated at 4 percent compared to 5½ percent projected under the program. Food price increases, and the impact of high oil prices, are expected to increase inflation to 8–10 percent in the near term. Agricultural performance is expected to rebound in 2001, and with an increase in infrastructure rehabilitation, GDP growth is projected to recover to 6 percent. With the maintenance of prudent monetary and fiscal policies, inflation is projected to return to below 5 percent by the end of 2001.
Poverty Reduction Strategy: The authorities have prepared an Interim Poverty Reduction Strategy Paper that meets core requirements and provides a sound basis for developing a fully participatory PRSP, as well as an adequate framework for Fund and Bank concessional assistance. As indicated in the Joint Staff Assessment, the main concern for the full PRSP relates to the government’s weak administrative capacity and difficulties in coordinating arrangements among different agencies and policy initiatives.
Main Policy Issues
The budget framework for 2001: The budget aims for a further improvement in revenue mobilization and expenditure management in line with PRGF objectives. Measures to broaden the tax base and improve tax and customs administration will need to be fully implemented to achieve the revenue objective. Improved spending for the social sectors will depend on the successful implementation of Priority Action Programs, and will be needed to support the authorities’ poverty reduction goals.
Bank Restructuring: Substantial progress has been made in bank relicensing and in consolidating the banking system. The priority for 2001 will be to monitor closely the performance of potentially viable banks against their Memoranda of Understanding, and to instill a commercial culture into the restructured Foreign Trade Bank as part of its preparation for privatization.
Military demobilization and civil service reform: Delays experienced to date in these difficult, but vital, areas of structural reform will need to be made up to protect the program’s medium–term macroeconomic and poverty reduction objectives.
Front Matter Page
January 19, 2001
Front Matter Page
EDITORIAL DIVISION
ROOM IS 7-1200 0493
News Brief No. 01/6
FOR IMMEDIATE RELEASE
January 19, 2001
International Monetary Fund
700 19th Street, NW
Washington, D. C. 20431 USA
EXTERNAL RELATIONS DEPARTMENT
Telephone 202-623-7100
Fax 202-623-6772
Front Matter Page
January 19, 2001
