Gov’t Officials At Odds Over Debt Levels

Government officials are at odds over how much Cambodia’s national debt amounts to.

On Wednesday, Prime Minis­ter Hun Sen said Cambodia’s debt stands at just $2 billion, contradicting information provided by CPP lawmaker Cheam Yeap last week that the number is actually $7 billion, or 63 percent of last year’s gross domestic product.

Mr Yeap, chairman of the Na­tional Assembly’s commission on finance, retracted that figure yesterday, claiming he no longer knew what it was.

“We don’t know how much we owe in total,” Mr Yeap said, adding that he was uncertain about whether Mr Hun Sen’s claim was accurate or not, since he did not follow the speech. He said he thought Mr Hun Sen was referring to $1.8 billion in loans that is still owed to Russia and the US from the 1970s and 1980s.

“What he mentioned was re­garding previous debt owed to the United States and Russia,” he said.

Last week, Mr Yeap said the $1.8 billion owed to the US and Russia made up only a part of the total $7 billion the country owes in external debt. He said that $4 billion is owed to China, while the remainder is owed to other countries and organizations such as the Asian Development Bank, the World Bank and the International Monetary Fund.

Chan Sophal, president of Cam­­bodian Economic Associa­tion, said the difference be­tween the two figures was important, as a higher budget deficit would result in greater risk to the country’s sovereign debt.

“If it is between 3 to 4 billion dollars, then it is OK. If it’s $7 billion, then I think it would be a bit high,” he said.

“The risk is that we will have to pay a lot back, which will be a big pain on the budget, especially when our domestic revenue is small at around 12 percent of the GDP.”

Ratings agency Standards & Poor’s earlier this week reduced Cambodia’s long-term sovereign debt rating by one notch to B, cit­ing concerns over the limited ability of the government to raise additional sources of revenue.

“I think a number of loans is OK if we use the loans productively and invest in the right sectors, but we should not rely on the hope that some loans will be written off in the future,” Mr So­phal said.

In February, the International Monetary Fund said borrowed money for projects such as hydropower dams added un­quan­­­tifi­­­able risks to Cambodia’s debt.

It also said risks would be in­curred through the country’s “sooner-than-anticipated shift” of financing from grants to more expensive loans.

The mystery behind Cambo­dia’s debt levels comes as governments worldwide are paying close attention to their budget de­ficits, with huge government bail­outs having already occurred in Eu­­ropean countries such as Greece and Ireland.

Last week, the National Bank of Cambodia said Cambo­dia’s debt at the end of 2010 stood at $5.4 billion, of which $2.5 billion was loans from other governments. The Ministry of Finance in March said the total for the same period stood at just $3.1 billion.

“I do not know about this issue, so I dare not to answer,” said Ut Chhorn, an undersecretary of state at the Ministry of Finance, re­ferring all questions to Finance Minister Keat Chhon.

Secretary of State at the ministry Ouk Rabun also declined to comment.

Earlier this month, China ap­proved $500 million in post-flood infrastructural loans to Cam­­bodia. It also gave an additional $1.2 billion in interest-free loans in late 2009. On top of that, Cambo­dia plans on bor­rowing as much as $1.1 billion more next year, ac­­cording to 2012’s draft budget law.

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