The government Wednesday announced the completion of the first round of reforms aimed at public financial management, citing budgets surpluses derived from improvements in revenue collection and cash management.
Domestic revenue collected by the government increased from 2.625 trillion riel ($656 million) in 2005 to 4.019 trillion riel ($1 billion) in 2007—an annual average increase of 23 percent, Finance Minister Keat Chhon said in a speech at the third annual review meeting for the reform program.
“In three years of implementing the Public Financial Management Reform Program, we have completely reversed our budget implementation from a chronic cash shortage to a cash surplus,” Keat Chhon said.
Boosted revenue collection, in addition to improved cash management, has enabled the government to pay civil servants on time, he said.
He added that government expenditures have grown by a little more than 20 percent per year since 2005 from 3.513 trillion riel ($878 million) to 4.586 trillion riel ($1.14 billion).
The cash balance at the National Treasury has also reached 1 trillion riel ($250 million), 250 times more than the balance in 2003, Keat Chhon said.
Speaking at the review meeting, Prime Minister Hun Sen said the state was also able to double its foreign reserve holdings from $809 million in 2004 to $1.6 billion by the end of 2007. That figure has now increased to $1.9 billion, he added.
Hun Sen said that to keep inflation at bay his government would invest in infrastructure and irrigation projects, collect taxes on unused land holdings, and stabilize the riel against the dollar.
Speaking at Wednesday’s meeting on behalf of Cambodia’s development partners, International Monetary Fund Resident Representative John Nelmes praised the government’s reform efforts, saying they have contributed to macroeconomic stability.
In particular, he highlighted the improvements in revenue collection, noting that the government collected revenue equal to about 9.5 percent of gross domestic product in 2007, up from 8 percent the previous year. Most countries collect about 20 percent of GDP.
“This is a highly commendable effort,” Nelmes said of the revenue collection, adding that new procedures had kept spending “broadly in line” with the national budget. As a result, the overall budget deficit declined in 2007, and the government was able to build up reserves.
“Sound fiscal outcomes such as this are critical for macroeconomic stability, particularly now, to help combat domestic inflation pressures,” Nelmes said.
SRP President Sam Rainsy said the government could rattle off as many statistics as it wants regarding fiscal management, but it has still not been able to tackle two key economic issues: unemployment and inflation.
“If the economy improves, we must look at the unemployment rate. In Cambodia there is a 50 percent unemployment rate—it is the government’s failure,” said Sam Rainsy, himself a former finance minister. He claimed inflation currently stands at about 30 percent.
“We don’t have to look at the statistics. We don’t have to dream about the statistics,” he said. “These two issues reveal our low living standard.”