The Council of Ministers on Friday approved a plan to increase the amount of borrowing from foreign countries by as much as 33 percent over the next three years, in a bid to counter a decrease in grants and concessional loans.
In a statement released after its weekly meeting, the Council of Ministers said that the amount of annual borrowing would be allowed to increase from 600 million SDR (about $844 million) this year to 800 million SDR (about $1.127 billion) by 2018.
SDR, or “special drawing rights,” is an international reserve asset whose value is defined by the International Monetary Fund based on four of the world’s major currencies.
“Cambodia is graduating from a low-income country into a low-middle-income country, and that has resulted in the flow of grants and highly concessional credit for Cambodia dropping respectively,” the Council of Ministers statement said.
It said the increase in foreign borrowing was “in accordance with the fiscal budgetary policy context and macro-economic development,” promising that there would be “effectiveness, efficiency, transparency and accountability in public debt management.”
Officials at the Finance Ministry could not be reached for comment.
Ke Wandara, a lawmaker and treasurer for the opposition CNRP, said that an increase in borrowing would only benefit the country if spending of those funds was done with proper transparency.
“They have to think about public interest from the people, and the government always borrows money from some countries that do not protect human rights, like from China,” he said.
“Secondly, we are concerned that after we get the amount of borrowing we do not know exactly what the money will be used for.”
Jayant Menon, lead economist at the Asia Development Bank’s regional integration office, said that an increase in borrowing was likely necessary for Cambodia to meet its economic growth goals.
“Cambodia is a transitional economy—a developing economy—so it does need to use the savings of foreigners to increase the rate at which it can grow, so being in debt as a developing country is not a bad thing,” Mr. Menon said.
“Cambodia is already quite highly indebted, so the issue is what they use the money for, if they are going to use it to increase infrastructure and there are good governance systems in place, increasing debt is not a bad thing.”