The Council of Ministers yesterday approved the 2011 Budget Draft Law which calls for $2.4 billion in government expenditures next year, an 18 percent increase over the 2010 budget, Finance Minister Keat Chhon said yesterday.
The budget is expected to be submitted to the National Assembly within a week for debate and approval, according to the Council of Ministers.
Speaking on the sidelines of a signing ceremony at the Ministry of Finance, Mr Chhon said the increase will, if passed by the National Assembly, in part go towards “health, education and to invest in infrastructure.”
“We are creating the funds to support agriculture, and also to increase the capital of the Rural Development Bank,” he said.
Though defense spending in the 2010 budget increased 24 percent compared to the year before, Mr Chhon said this year’s defense spending will be “roughly remain the same.”
Mr Chhon told the National Assembly earlier this year that the budget could reach up to $3 billion for next year, a figure criticized by the opposition as being beyond the country’s fiscal means.
He said yesterday that the estimate had been decreased during the course of discussions at the ministry.
“At the time… it was in the process, at the stage of budget planning,” he said.
The announcement comes after recent advice from the International Monetary Fund that Cambodia must increase its tax revenues to bolster spending on infrastructure and other areas of the economy.
According to the IMF the country’s tax ratio remains between 5 and 7 percent points below that of nations with similar economies.
Economists have said Cambodia’s tax collection equals about 11 percent of gross domestic product, compared to 16 percent in similar developing countries.
Mr Chhon said that the government plans to increase the amount of tax collection to 13 percent of GDP, which will involve reducing corruption.
The government, he said, will “educate people about their obligation to pay tax… People try to evade not to pay.”
Chan Sophal, president of the Cambodian Economic Association, wrote in an email that to increase rice exports, a “substantial budget increase” is needed.
“There is ample opportunity for the Cambodian government to increase the domestic revenue although it may require reduction in corruption,” he wrote.
Potential sources include mineral resource revenues, formalization of revenues related to economic land concessions, and overseas grants and loans, he wrote.
SRP Lawmaker Son Chhay yesterday criticized the budget drafting process as non-transparent and said that the finished budget often does not accurately represent actual government spending. Items like education and health do not get the money allotted by the budget, he said.
“We have never been able to have information on how the process is taking place,” he said. “The parliamentarians only receive the draft just a few weeks before the end of the year. Sometimes we have only ten days to study the budget.” (Additional reporting by Phann Ana)
