Finance Minister Seeks Big Budget Hike for 2011

Keat Chhon’s proposal of $3 billion would represent a 50 percent increase over this year’s budget

Finance Minister Keat Chhon announced plans yesterday to draft a national budget of about $3 billion for next year—almost 50 percent higher than the 2010 budget—but did not offer details on revenue sources or planned spending.

At a strategic planning session in front of the National Assembly’s Finance and Banking Commission, Mr Chhon said the government would spend about 12 trillion riel, or roughly $3 billion, in 2011—up from 8 trillion riel, or $2 billion, on this year’s budget.

Mr Chhon said the details would be hammered out later.

“We will talk about this again in August. This is the first phase…. We won’t talk about how much money will be spent on which ministry yet,” he said.

The proposed total would represent a 50 percent budget increase over this year, far higher than the 11 percent jump between 2009 and 2010.

Government officials yesterday declined to discuss where funding for the proposed spending would come from, but Mr Chhon told the Assembly meeting that Cambodia would have to generate around 9 trillion riel, more than $2 billion, next year to meet the proposed spending targets.

“This is only a plan. This month [ministry officials] are gathering expenditure and revenue plans from state institutions,” said Cheam Yeap, CPP lawmaker and chairman of the Assembly’s Finance and Banking Commission.

Despite the spending proposal, officials yesterday stressed that controlling the deficit would also be a priority for the government.

“The national budget deficit for 2010 was 5.4 percent, and it will be lower in 2011,” said Finance Min­istry Secretary-General Vong­sey Vissoth, though he did not ex­plain on what his prediction was based.

The International Monetary Fund reported that Cambodia’s budget deficit was 6.75 percent of GDP in 2009 and recommended a figure of around 5.5 percent for this year. The IMF warned the government about maintaining fiscal rectitude as early as September last year.

Chan Sophal, president of the Cambodian Economic Association, said the proposed figure represented a larger increase than he had ex­pected, but added that it was not an unrealistic target.

Mr Sophal said that tax revenues currently account for only around 11 percent of Cambodia’s GDP, lower than the regional average of around 16 percent, giving greater importance to identifying where the new money for the growing budget will be generated.

“We need to know where the money is coming from and where it is going to be spent,” he said.

SRP spokesman Yim Sovann yesterday called on the government to make the budget process more transparent and to explain where the extra money for next year’s budget would be sourced.

“The people know very few things about state expenditure and revenue reports. Nobody knows where the government borrows money from,” he said.

Edwin Vanderbruggen, managing director of the taxation practice at Phnom Penh law firm DFDL Me­kong, said the government could significantly increase its revenue from taxation in the coming budget.

Improved corporate governance and improved tax administration have already spurred increased domestic tax revenue for the past few years—despite a blip in 2009 when the economic crisis was at its height.

“If the government is able to im­prove tax administration further…I definitely see improving [budget revenues] in the future,” he said.


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