After the release of a report that claimed the World Bank has threatened to withhold aid money to Cambodia, economists and development experts said such an action would be a major embarrassment to the government but perhaps might boost future accountability and reform.
The Associated Press reported Saturday that the World Bank had sent two letters, one to Prime Minister Hun Sen and another to Finance Minister Keat Chhon, threatening to freeze millions of dollars in assistance if the government did not repay $2.7 million allegedly misused in a World Bank-funded demobilization project.
World Bank officials have repeatedly declined comment on the report, calling the issue “confidential.”
Economists said Wednesday that if the World Bank were to suspend its funding, the country would be injured not so much by the loss of capital but by the loss of face.
“I think it’s very important for the whole story of development,” said Kang Chandararot, economist and director of the Cambodia Institute of Development Study, adding that other donors would likely use the World Bank’s action as a model to see that aid was well-spent.
According to the World Bank Web site, the Bank currently has 15 active projects in Cambodia, ranging from electrification to ensuring biodiversity. The Bank pledged $45 million in aid at last month’s Consultative Group meeting.
Although the government would struggle without the money, and certain private sector projects would face delays, the amount lost would not significantly hurt the nation, Kang Chandararot said.
“In terms of monetary effect, I don’t think there is any impact on the whole economy,” he said.
Sok Hach, director of the Economic Institute of Cambodia, was cautious with his comments on the issue, because he too had been unable to independently verify the report.
“I think the impact would be substantial,” he said. “But I think it’s good when an aid agency is consistent with its own policy to fight corruption.”