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PHNOM PENH – The Cambodian government plans to unlock $600 million of national savings to offset the estimated $412 million national budget deficit by the end of 2023.
According to the mid-year budget report released on Aug. 4 by the Ministry of Economy and Finance, Cambodia's public revenue in the first half of 2023 reached 14,202 billion riel (approximately $3.5 billion), equivalent to 50.7 percent of what has been set by the financial law, but 7.5 points less than the same period last year.
The lower-than-expected national revenue can be explained by the several crises affecting the Cambodian economy, the ministry said.
Even though the COVID-19 pandemic is largely over, its aftermaths still impact the country’s economic recovery, and so does the prolonged conflict between Ukraine and Russia. Combined, these two crises have slowed the orders of garments from the U.S. and European countries, impacting Cambodia’s exports.
Over the first six months of 2023, the country also saw a sharp decline in car imports, which is an important source of income for public finances. The many free-trade agreements that Cambodia is part of have also decreased customs revenue.
Public spending in the first half of the year has reached 43.5 percent of the total $9.6 billion budget.
As of the end of June 2023, the national budget had therefore a temporary deficit of 953.5 billion riel (approximately $232 million), which is expected to jump to 1,674 billion riel (around $412 million) by the end of the year.
To compensate for the loss and stay within the boundaries set by the budget law, the government plans to use about $600 million of national savings to meet its budget balance for 2023.
By doing so, the Ministry of Economy estimates the total state budget deficit will stand at 7.27 percent of the country’s Gross Domestic Product (GDP), lower than the deficit forecast in the finance law 2023, which stands at 7.56 percent of the GDP.
Meas Soksen San, the ministry’s spokesperson, said that the use of national savings is due to Cambodia facing global issues such as COVID-19, the economic crisis, and the growing inflation rate.
The 32nd Southeast Asian Games (SEA Games) and the organization of the 7th general election have also weighed on public spending this year.
While the spokesperson of the National Election Committee (NEC), Som Sorida, announced on Aug. 8 that the national election cost $50 million, the regional sports event is estimated to have cost over $120 million to the government.
“The $600 million is used as a supplement to intervene to help people, as we did during the COVID-19 pandemic and [during the] inflation,” Soksen San said. “We continue to help our citizens.”
The spending of the budget will hopefully stimulate the economy and be of assistance to the local population.
“We demand an additional budget because the current national revenue is not enough to meet the expenditure of helping people, which is a government priority,” he said.
In 2020 and 2021, the government spent around $1.6 billion to cover the impact of the COVID-19 crisis on key sectors of the country's economy. After spending $246 million in 2020, the state spent $1.381 billion the year after.
The government's main source of revenue is from customs and taxes. In the first half of this year, the General Department of Customs and Excise of Cambodia collected 4,607,655 million riel (about $1.2 billion), equivalent to 41.4 percent of what has been planned in the financial law.
The General Department of Taxation collected 6,890,334 million riel (around $1.7 billion), equivalent to 56.1 percent of the financial law.
Originally written in Khmer for ThmeyThmey, this story was translated by Te Chhaysinh for Cambodianess.