Government Mulls Issuing Sovereign Bonds

Cambodia is considering offering sovereign bonds to raise more revenue for the national budget and move away from its dependence on overseas aid, a senior central bank official said Sunday.

National Bank of Cambodia director-general Nguon Sokha said the Ministry of Economy and Finance was currently looking at other countries’ experiences with bond markets and was seeking outside help to issue the government’s first bonds.

By issuing sovereign bonds, governments can raise money from international investors that are usually paid back with interest at the end of a fixed term.

“We are at the early stages of seeing what other countries do, we have to build capacity. It’s not yet come to decide what type, what denomination it is,” Ms. Sokha said. “There are some technical issues and there are some political issues,” she added.

Ms. Sokha said there was no set date for when bonds might be issued, but officials were working on the plan with help from the Asian Development Bank (ADB) and members of the Asean+3 group, which includes China, Japan and South Korea.

“The government have not reached the decision,” Ms. Sokha said, adding there was a number of different ways the move to issue bonds could work.

“It [issuing bonds] is [for] different purposes, for example some countries issue short-term securities for budget management purposes and some countries issue longer-term, or they issue for financing certain projects.”

She said that while the government did not urgently need to raise funds at present, the possibility was being looked at as a future contingency, especially as the country becomes wealthier.

Cambodia is set to graduate this year or next to a lower middle-income country, but still qualifies for overseas development assistance and concessional loans from international institutions.

“For the long-term financing, we cannot really survive on development assistance,” Ms. Sokha said.

ADB senior country economist Peter Brimble said the bank would aid the government on potentially issuing bonds, as part of ongoing assistance it provides to the Finance Ministry.

He said the move was a positive step toward creating more “fiscal space”—in other words, enabling the government to spend more money.

“I think it is sensible for the government to look at the alternatives [to development assistance], in the bond market, public-private partnerships [or] increasing tax revenues,” he said.

He also said it could help toward the government’s stated aim of moving the economy away from the dollar, if the riel was the chosen denomination of the bonds.

Although Cambodia does not currently issue sovereign bonds, it has been assessed recently by credit ratings agencies. The most recent assessment by Moody’s gave the country a stable but high-risk “B2” rating, which means Cambodia is deemed to have “very low economic resiliency.”

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