Front Matter

Front Matter Page


IMF Country Report No.12/46


February 2012

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2011 Article IV consultation with Cambodia, the following documents have been released and are included in this package:

  • Staff Report for the 2011 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on December 8, 2011, 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 18, 2012. 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.

  • Debt Sustainability Analysis prepared by the staffs of the IMF and the World Bank.

  • Informational Annex prepared by the staff of the IMF, the World Bank, and the Asian Development Bank.

  • Public Information Notice (PIN).

The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.

Copies of this report are available to the public from

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700 19th Street, N.W. • Washington, D.C. 20431

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January 18, 2012


Context. Growth has been strong with signs of a broadening recovery, but severe floods constitute a temporary setback to agriculture and economic diversification. The precarious global outlook exposes Cambodia’s narrow export base to significant downside risks. A high degree of dollarization and largely reduced fiscal space constrain the authorities’ ability to cushion shocks. Against this background, discussions focused on fiscal and financial sector risk management strategies for the near term and ways to strengthen foundations for high and stable growth over the medium term. Past surveillance has been characterized by broad agreement on the direction of policies, notably safeguarding fiscal sustainability, while progress in implementing key 2010 FSAP recommendations has been mixed.

Fiscal space. Macroeconomic stability hinges on prudent fiscal policies. While some fiscal stimulus would be warranted in the event of a severe downturn, the mission cautioned that fiscal space is limited and that greater consolidation efforts are needed to strengthen revenue administration and prioritize spending. While the outlook for external debt sustainability has improved on Cambodia’s prudent track record, potentially large contingent liabilities from public-private power sector projects need to be carefully managed.

Elements of greater monetary independence. Although the National Bank of Cambodia’s (NBC) influence on monetary conditions is very limited, steps should be taken to normalize monetary conditions amid robust growth and rapid credit expansion. The pace of tightening can be recalibrated as risks to growth materialize. This would also signal a strong commitment to promoting the riel, along with progress to develop an interbank market and upgrade the NBC’s liquidity monitoring.

Financial deepening. In line with ongoing technical assistance (TA) efforts and key recommendations from the 2010 FSAP, discussions focused on the merits of a moratorium on new bank licenses, initiatives to develop the foreign exchange market in conjunction with the recently created stock market, and ways to make financial system supervision more forward-looking and comprehensive, including by enhancing the quality of data reported by banks.

Foundations for stronger growth. Policy initiatives to improve the investment climate are beginning to bear fruit, and their steadfast implementation holds the promise of raising Cambodia’s growth potential.

Approved By

Vivek Arora and Dominique Desruelle

Discussions took place during November 28–December 8, 2011. The staff team comprised O. Unteroberdoerster (Head), J. Ree, P. Rungcharoenkitkul (APD), R. Maino (MCM), and F. Ahmed (Resident Representative). T. Feridhanusetyawan provided support from headquarters. Ms. Budiman and Mr. Kith (both OED) also participated. The team met with Deputy Prime Ministers Keath Chhon and Sok An, National Bank of Cambodia Governor Chea Chanto, and other senior officials.




  • A. Creating And Safeguarding Fiscal Space

  • B. Taking Basic Steps Toward Greater Monetary Independence

  • C. Managing Financial Deepening

  • D. Building Foundations for Stronger Growth



  • 1. Selected Economic Indicators, 2008–12

  • 2. Balance of Payments, 2008–16

  • 3. Medium-Term Macroeconomic Framework, 2008–16

  • 4. General Government Operations, 2008–12 (GFSM 1986)

  • 5. General Government Operations, 2008–12 (GFSM 2001)

  • 6. Monetary Survey, 2008–11

  • 7. Key 2010 FSAP Recommendations

  • 8. Core Financial Soundness Indicators (FSIs), 2008–11

  • 9. Millennium Development Goals Indicators


  • 1. A Strong Recovery Amid Rising Inflation and Credit Growth

  • 2. Gains in Fiscal Consolidation Prove More Difficult, Fiscal Space Is Limited

  • 3. A Rapidly Growing Financial System

  • 4. Drivers of Growth


  • 1. How Much Fiscal Space Does Cambodia Have?

  • 2. Bank Competition and Financial Stability

  • 3. Investment as a Driver of Potential Growth in Cambodia

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January 18, 2012

Approved By

Vivek Arora and Dominique Desruelle (IMF) Jeffrey D. Lewis and Sudhir Shetty (IDA)

Prepared By

International Monetary Fund International Development Association

Cambodia has been upgraded to a “medium performer” based on the World Bank’s Country Policy and Institutional Assessment (CPIA) and now faces a low risk of debt distress (from moderate last year). While external debt burden indicators do not breach the relevant indicative thresholds under the baseline scenario, the debt level is sensitive to shocks as indicated in standard bound tests.2 Under an alternative scenario with a higher level of borrowing over the medium and long term, Cambodia may lose its low debt distress rating. In particular, the scope for absorbing additional risk, including from contingent liabilities related to the rapid growth of infrastructure projects outside the budget and the banking system, would be substantially smaller. All this underscores the need for a prudent borrowing strategy, underpinned by continued fiscal consolidation over the medium term, and improvements in debt and contingent liability management, which should be incorporated in the authorities’ upcoming debt strategy document.

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January 18, 2012

Prepared By

Asia and Pacific Department

(In consultation with other departments)


  • I. Fund Relations

  • II. IMF-World Bank Collaboration

  • III. Relations with the Asian Development Bank

  • IV. Statistical Issues

  • V. Main Websites of Data

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Public Information Notice (PIN) No. 12/19


February 27, 2012

International Monetary Fund

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Washington, D. C. 20431 USA