Economist says increase in spending canceled out by rising consumer prices
Total government spending in 2012 is set to reach $2.62 billion, an increase of 9 percent on the $2.4 billion the government had budgeted to spend in 2011, according to a copy of the 2012 draft budget law obtained yesterday.
As part of the new budget, more government spending will go toward national defense, social affairs, agriculture, industry and commerce.
Despite the rise in state expenditure, a senior economist warned that the increase was not enough to make up for inflationary pressures, and urged the government to invest more in the country.
The draft law, which was approved by the Council of Ministers on Oct 19 and is now at the National Assembly for discussion, also requests extra funds for expenditure carried out to deal with the flooding that is still affecting tens of thousands of rural Cambodians in 17 provinces.
According to the draft budget, the government has also requested an additional $58.8 million to cover overspending made this year. Flood relief accounts for $4.87 million of the excess, with the defense sector accounting for $53 million (Cambodia engaged in armed conflict with Thailand on two occasions this year), while $290,000 was spent during the hosting of the Asean Inter-Parliamentary Assembly in September.
Defense and security sector spending—which covers the ministries of defense and interior—will increase from $297 million this year to $341 million in 2012 under the latest draft law. The Ministry of National Defense will get $213 million of the allocated money, up from $190 million this year.
The social affairs sector will receive $593 million in 2012, up from $501 million this year. Within this sector, the Education Ministry will receive $245 million in 2012, up from $218 million. The Ministry of Health has been allocated $193 million for next year’s spending, up from $165 million.
The economic sector—which includes the ministries of agriculture, industry, mines and energy, and commerce—will be allocated $231 million, up from $115 million. The Ministry of Agriculture will receive $30 million of this, an increase of just $7 million on this year’s spending.
Despite the modest increase in government spending, there are doubts over how much of a difference it will actually make.
Chan Sophal, president of the Cambodian Economic Association, said that 9 percent increase on this year’s budget had not taken inflation into account.
“A 9 percent increase on last year’s budget is not much, and it does not take into account next year’s inflation. It is not enough,” Mr Sophal said.
Year-on-year inflation rose to 6.7 percent in September, up from 6.4 percent in August.
Mr Sophal called on the government to allocate more money in the budget to agriculture, to encourage growth and increase people’s standard of living.
“Two hundred thirty-one million dollars [for the economic sector] is not enough. The National Budget should allocate more funds to the development of the economy than social affairs,” said Mr Sophal, adding that he believed the amount granted to this area should be doubled, as it would also encourage more investment in education.
Chheang Vun, chairman of the National Assembly’s Commission on Foreign Affairs, International Cooperation, Information and Media, disagreed with Mr Sophal’s concerns, saying that the areas of social affairs and defense were Cambodia’s “backbone” for developing its economy.
“Whatever the budget is allocated to, all areas will help develop the national economy,” said Mr Vun, adding that a country needs to “feel at peace” to inspire confidence in potential investors, and that spending on social affairs and defense were crucial to ensuring this stability.
“The 2012 budget has been made correctly, in alignment with Cambodia’s current situation, which involves dealing with floods and disaster,” he said.
