By:
• Ou Sokmean

• 27, August 2024 , 7:15 PM

PHNOM PENH–The Cambodian government has unveiled a new public debt management strategy for the period 2024-2028, with the aim of ensuring sustainable and responsible borrowing while supporting the country's economic development ambitions.

This comes as the total public debt reached $11.09 billion at the end of the first quarter of 2024 and is projected to reach $12 billion by the end of the year.

The government believes that by implementing this strategy, Cambodia will be able to achieve its goal of becoming an upper-middle-income country by 2030 and a high-income country by 2050.

Published on August 26, the Public Debt Management Strategy encompasses all public debt operations, including lending, state guarantees and debt risk management.

The strategy outlines Cambodia’s annual borrowing limit, setting a ceiling of between 1.7 billion and 2 billion Special Drawing Rights (SDRs) for loans from international financial institutions and development partners.

An SDR is an international reserve asset created by the International Monetary Fund (IMF). It's not a currency itself but is valued based on a basket of five major currencies: the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.

While Cambodia could potentially increase its annual borrowing to 2.5 billion SDRs, the government has imposed a cumulative limit of 10 billion SDRs over a five-year period. This translates to roughly $13.5 billion in U.S. dollars.   

The Cambodian government issues between 500 billion and 1 trillion riel ($123 million to $246 million) worth of state securities annually. This figure could potentially rise to 1.2 trillion riel ($295 million) per year, but the government has set a cumulative ceiling of 4 trillion riel ($984 million) over a five-year period.

To manage its debt burden responsibly, the government has implemented several measures. Firstly, it has capped the payment guarantee for new projects at 10 percent of the previous year's national budget revenue. Secondly, the state has discontinued direct credit and loan guarantees to the private sector.

Finally, the government is committed to maintaining the public debt-to-GDP ratio below 55 percent. This ensures that Cambodia's debt remains sustainable and manageable, allowing for continued economic growth and development.

Cambodia's public debt has been a topic of increasing concern in recent years.

Despite Cambodia's relatively low debt-to-GDP ratio compared to many developing countries, concerns are mounting about the sustainability of its public debt.

While the current value of foreign public debt relative to GDP remains below 40 percent, and the ratio to exports is under 180 percent, there is a growing need for vigilance.

Finance Minister Aun Pornmoniroth has reassured the public that Cambodia's public debt situation remains manageable and low-risk, even in the face of challenges like the COVID-19 pandemic and other external factors.

He emphasized that the sustainability of Cambodia's public debt hinges on a robust management system. This includes a strong legal framework, effective policies, adequate institutional capacity, and a reliable information technology system.

The government's strategy outlines that funds secured from international financial institutions and development partners should be allocated to investments in efficient public infrastructure.

To ensure sustainable debt management, the strategy mandates that next year's new debts should not exceed 10 percent of the total public debt. Additionally, at least 90 percent of the total public debt inventory should be composed of fixed-interest rate debt components, reducing the government's exposure to interest rate fluctuations.

Cambodia's public debt stock reached $11.09 billion by the first quarter of 2024, with a significant portion, 64 percent, sourced from bilateral loans and the remaining 36 percent from multilateral development partners.

The country's primary foreign lenders include China, Japan, South Korea, and France. With new loan agreements in the pipeline, Cambodia's foreign debt is projected to reach a total of $12.25 billion by the end of 2024.