Cambodia already has received the first $11.7 million disbursement of an $81.6 million, three-year loan from the International Monetary Fund, Tal Nay Im, general director of the National Bank of Cambodia, said Thursday.
After a two-year absence, the IMF decided last week to resume assistance to Cambodia by granting the government’s request for a loan for its economic program for 1999-2002.
The loan was approved under the Enhanced Structural Adjustment Facility, a program that assists countries that undertake economic reform programs to strengthen their balance of payments and improve their growth prospects. The loan will support the value of the riel, said Chou Kim Leang, director of external finance at the Ministry of Finance.
“The IMF [also] plays a key role for donors to decide their assistance to Cambodia,” Tal Nay Im said.
There will be seven disbursements of about $11.7 million each, the first of which has been placed in the foreign reserves of the National Bank, she said.
Whether the IMF’s assistance will continue or be a repeat of the past, with the lending institution suspending its loan, will be determined by the government’s progress on reforms. Subsequent disbursements will be available after Cambodia meets certain performance criteria, according to IMF documents. The first review is scheduled for the end of May and the second for the end of November 2000.
The first will focus on forestry policy and implementation of the 2000 budget, while the second will encompass forestry policy, budget management, civil service reform and demobilization.
“To improve budgetary management and meet the fiscal objectives, emphasis is being placed on avoiding ad hoc customs duty exemptions, continuing to broaden the tax base, improving customs administration and
strengthening administrative capacity,” Stanley Fischer, first deputy managing director of the IMF, said in a statement.
The IMF cited credible actions taken over the past year to strengthen budgetary management and governance and favorable economic development as reasons the IMF decided to resume assistance to Cambodia.
Under Cambodia’s 1999-2002 economic program, the government will aim to raise economic growth to 6 percent a year and lower inflation to 4 percent, the IMF said. The lending institution predicts Cambodia’s real GDP will increase 4 percent this year.
“This is another testimony to the progress made by the government in its reforms during the last few months,” Prime Minister Hun Sen said Wednesday.
In approving the new loan, the IMF noted political stability has returned to Cambodia since factional fighting in 1997, and the government has shown it is committed to effectively tackling governance issues. The IMF also said the government in the past month established measures to show it was managing forestry resources, and reforming the banking system—two of the IMF’s criteria for resumption of assistance.
Officials recently announced the establishment of an independent forest crime monitoring and reporting program that will include inspecting commercial logging operations, checking key border crossing routes and reviewing government reports to validate purported achievements.
“Measures taken so far have demonstrated the government’s commitment to redress past mistakes and move toward an environmentally sustainable policy,” the IMF said.
Also, the National Assembly recently approved a commercial banking law that establishes a review of licenses. The IMF said Cambodia still needs to strengthen the central bank’s supervisory capacity.
The IMF had a $120 million loan program for Cambodia, but canceled its $20 million installment in late 1996 because of the government’s inability to fight illegal logging and generate funds for the national budget.
The new loan has an interest rate of 0.5 percent and is payable over 10 years with a five-and-a-half year grace period.
Japanese Ambassador Masaki Saito called the IMF’s resumption of assistance a “big breakthrough.”
“The prime minister and the cabinet minister are well aware of the IMF conditions,” Saito said. “I’m sure they will do their best to comply.”
