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IMF Country Report No. 19/387
CAMBODIA
2019 ARTICLE IV CONSULTATION—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR CAMBODIA
December 2019
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 2019 Article IV consultation with Cambodia, the following documents have been released and are included in this package:
A Press Release summarizing the views of the Executive Board as expressed during its December 6, 2019 consideration of the staff report that concluded the Article IV consultation with Cambodia.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on December 6, 2019, following discussions that ended on October 11, 2019, 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 November 20, 2019.
An Informational Annex prepared by the IMF staff.
A Debt Sustainability Analysis prepared by the staff's of the IMF and the International Development Association (IDA).
A Statement by the Executive Director for Cambodia.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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© 2019 International Monetary Fund
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November 20, 2019
CAMBODIA
STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION
Key Issues
Context. Stable macroeconomic environment, strong growth and ongoing structural reforms have contributed to significant progress towards Sustainable Development Goals (SDGs). At the same time, uncertainties, including from slower global growth and potential suspension of preferential market access under the Everything but Arms (EBA) scheme, highlight the importance of maintaining macroeconomic stability while meeting still large development needs, addressing elevated financial sector vulnerabilities and accelerating structural reforms.
Policy priorities:
Safeguarding fiscal sustainability and promoting inclusion. Continued strong revenue mobilization efforts and a prudent fiscal stance supported by restraining non-development current spending will allow additional spending to address development needs. Expenditures should be oriented towards supporting inclusive growth through priority infrastructure investment, as well as health and education spending. Fiscal governance should be further strengthened through reforms aimed at improving revenue administration, public financial management and spending efficiency. Managing fiscal risks from contingent liabilities calls for strengthening the PPP framework.
Addressing macro-financial risks. Prompt actions are needed to address elevated financial sector vulnerabilities and to improve the external position through moderating credit growth and implementing targeted macroprudential policies. This includes a prompt, broad-based policy response to address risks associated with the real-estate sector. Enhancing regulation and supervision, promptly introducing a comprehensive crisis management framework and improving financial sector oversight, including through closing gaps in the AML/CFT regime, would help build financial resilience. Policies should continue to encourage local currency use and further financial development.
Supporting progress towards SDGs. Policies should be geared towards addressing sizeable spending needs to reach SDG targets in health, education and infrastructure, with support from the private sector and international donors. Accelerated implementation of structural reforms is needed to remove structural constraints to growth, correct external imbalances, address governance and corruption weaknesses and promote sustainable and inclusive development. While steady progress has been made, additional efforts are needed to address data gaps, and improve data quality and transparency.
Approved By
Anne-Marie Gulde-Wolf and Yan Sun
Discussions took place September 30–October 11, 2019. The mission team comprised Jarkko Turunen (head), Eteri Kvintradze, David Corvino, and Mariya Brussevich (all APD), Paul Austin (STA), Aleksandra Zdzienicka (FAD), Matanee Satraphai (CDOT), Lisa Uemae (OAP), and Yasuhisa Ojima (Resident Representative). Alisara Mahasandana and Suasdey Chea (both OED) participated in some meetings. Hibah Khan and Ross Rattanasena assisted in the preparation of this report.
Contents
RECENT DEVELOPMENTS, OUTLOOK, AND RISKS
SAFEGUARDING FISCAL SUSTAINABILITY AND PROMOTING INCLUSION
ADDRESSING MACRO-FINANCIAL RISKS
SUPPORTING PROGRESS TOWARDS SDGS
STAFF APPRAISAL
BOXES
1. EBA Withdrawal Scenario
2. SDG Costing
3. Improving Public Investment Management
4. The Role of Special Economic Zones
5. Achieving Gains in Economic Welfare
6. Aligning Macroeconomic Statistics to Emerging Needs
FIGURES
1. Robust Growth and Low Inflation
2. Elevated Financial Vulnerabilities
3. Worsening External Position
4. Robust Revenue Performance Amid Spending Pressures
5. Moving to More Inclusive and Sustainable Growth
TABLES
1. Selected Economic Indicators, 2015–20
2. Medium-Term Macroeconomic Framework, 2015–24
3a. Balance of Payments, 2015–24, BPM5 (In millions of U.S. dollars, unless otherwise indicated)
3b. Balance of Payments, 2015–24, BPM5 (In percent of GDP, unless otherwise indicated)
4. General Government Operations, 2015–24 (GFSM 2014)
5. Monetary Survey, 2015–20
APPENDICES
I. Risk Assessment Matrix
II. External Sector Assessment
III. Implementation of Past Fund Advice
IV. A Strategy for Capacity Development
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CAMBODIA
STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
November 20, 2019
Prepared By
Asia and Pacific Department
(In consultation with other departments)
Contents
FUND RELATIONS
RELATIONS WITH OTHER INTERNATIONAL FINANCIAL INSTITUTIONS
MAIN WEBSITES OF DATA
STATISTICAL ISSUES
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CAMBODIA
STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION—DEBT SUSTAINABILITY ANALYSIS
November 20, 2019
Approved By
Anne-Marie Gulde-Wolf and Yan Sun (IMF) and Marcello Estevao (IDA)
Prepared by Staff of the International Monetary Fund and the International Development Association
| Cambodia Joint Bank-Fund Debt Sustainability Analysis | |
|---|---|
| Risk of external debt distress | Low |
| Overall risk of debt distress | Low |
| Granularity in the risk rating | Not Applicable |
| Application of judgment | No |
| Cambodia Joint Bank-Fund Debt Sustainability Analysis | |
|---|---|
| Risk of external debt distress | Low |
| Overall risk of debt distress | Low |
| Granularity in the risk rating | Not Applicable |
| Application of judgment | No |
The Debt Sustainability Analysis (DSA) using the joint IMF/WB Debt Sustainability Framework for Low Income Countries (LIC-DSF) shows that Cambodia remains at low risk of external debt distress. All debt burden indicators are projected to remain under their indicative thresholds under the baseline and the shock scenarios.1The overall risk of debt distress is low, but the analysis indicates that debt sustainability is vulnerable to export and growth shocks, and the materialization of contingent liabilities. The public and publicly guaranteed (PPG) debt-to-GDP ratio is projected to rise by 6½ percentage points during the next decade due to projected larger fiscal deficits in the medium term. These findings reinforce the importance of implementing reforms to increase the economy’s resilience to external shocks and encourage diversification. Further efforts to mobilize fiscal revenue, increase efficiency of public expenditure, strengthen fiscal governance and enhance monitoring of risks related to contingent liabilities are necessary to ensure debt sustainability in the medium term.
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Press Release No. 19/490
FOR FMMEDIATE RELEASE
December 26, 2019
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