This debt sustainability analysis was conducted using the
Cambodia’s Composite Indicator (Cl) index, based on April 2021 WEO update and the World Bank’s 2019 CPIA, indicates that the county’s debt carrying capacity is medium (2.966). The country classification is downgraded from a strong rating (3.075) applied in the 2019 DSA.
The PPP stock is estimated at around 15 percent of GDP in 2020, using IMF’s Investment and Capital Stock Dataset and information provided by the authorities.
Based on Cambodia Public Debt Statistical Bulletin (see Table 13 “Old Debt Under Negotiation”). Data reflects principal amounts, i.e., excluding any accumulated interest. The arrears relate to obligations made by the government in the early 1970s, which have been refuted by subsequent governments. The issue is still before the Paris Club. As these arrears continue to be disputed, they do not trigger a determination of an ‘in debt distress’ risk rating.
The authorities drafted the preliminary “Policy Framework of Development on the Government Securities” in September 2021, which aimed at (i) the first securities issuance in 2022, (ii) setting principles for the usage of fund from government securities, and (iii) appointing NBC as a fiscal agent and arranging the issuance operations.
For example, a central PPP unit had been established under the Ministry of Economy and Finance, and a new law on PPP is expected to be approved and implemented in 2021.
According to CEIC data, the total external debt amounted to US$17.7 billion in 2020, and private debt can be estimated at about US$8.9 billion after deducting PPG external debt.
The measures included (i) improving liquidity in the banking system through lowering required reserves and cutting interest rates, (ii) facilitating bank loan restructuring, (iii) redirecting resources to healthcare, (iv) loans and guarantees to affected small businesses, (v) tax breaks, wage subsidies, and support for firms retaining workers, and (vi) cash transfers to vulnerable households.
Gross reserves stood at 84.7 percent of GDP in 2020 and are projected to rise to around 90 percent of GDP (about US$ 45 billion) at the end of the decade.
The analysis estimates that the government deposit decreases to around 13 percent of GDP by 2026 due to a drawdown to meet the financing gap and deceleration of government savings accumulation.
However, the amount of external debt disbursement in 2021 (around 3.3 percent of GDP) is expected to be lower than previously forecast, on the back of a large initial drawdown from government deposits (about US$ 1 billion in 2021) in response to heightened financing needs in the post-COVID phase.
Given the lack of bond market infrastructure and expected drawdowns of the government deposit by 2023, the analysis assumes a more gradual path of the government bond issuance than implied by the authorities’ preliminary plan (from 2022).
The revised LIC-DSF determines the debt sustainability thresholds by calculating a Cl. The Cl is a function of the World Bank’s Country Policy and Institutional Assessment (CPIA) score, international reserves, remittances, individual country and global economic growth. The calculation is based on 10-year averages of the variables, across 5 years of historical data and 5 years of projection.
See World Bank (2018), “Cambodia; Sustaining Strong Growth for the Benefit of AH”.
The 2020 data lowered the 10-year average exports growth by 2.4 percent while increasing one standard deviation by 3 percent. Accordingly, the magnitude of the shock (historical average minus one standard deviation) rose by 5.4 percent due to 2020 exports.
Given that the standard deviation based on 2011–2019 data (6.8 percent) is around 70 percent of the 10-year (2011–2020) based standard deviation (9.8 percent).