Household Income Falls, Debt Rises Sharply After Drought

The economic stability of Cambodian households took a beating during the El Nino weather cycle that enveloped the region during the last dry season, resulting in drought conditions that drove many families into debt and lower income brackets, a new study has found.

The study, released last week, surveyed 2,400 households across the country and found that more than 50 percent of middle- and-upper-income families had taken out loans and fallen into lower income brackets.

Debt among the low-income families that were surveyed increased by an average of $1,200 by the end of the El Nino, as they bought new seed to replace failed crops and fallen livestock, says the report by the U.N.’s Food and Agriculture Organization, the U.N.’s World Food Program (WFP) and Unicef.

“Usually in a case of serious drought, the expectation is that the poorest people are most affected,” Francesca Erdelmann, the WFP’s deputy country director, said on Tuesday. “In this case, impacts were significant among the poor, but the effects of the drought extended into the groups that were relatively better off.”

Reaching its height in December and concluding in May, the El Nino cycle led to the worst drought in a generation, and about two-thirds of the country’s 25 provinces ran short of water for drinking and irrigation, according to the government.

Hundreds of livestock died, rural villagers became sick from dehydration, school hours had to be cut back, and canals, ponds and wells across the country ran dry. Prime Minister Hun Sen deployed 100 military trucks in April to deliver water to areas that rely on rainwater for everything from drinking to farming. Governors were told to remain in their respective provinces until the monsoon season began.

When rain began to fall again in late May, Mr. Hun Sen said the drought had provided lessons on how to “combat” such a situation in the future and that irrigation would be expanded.

But many had already felt the effects. Despite continuous declines in Cambodia’s poverty rate, the majority of those who escaped poverty “remain highly vulnerable—even to small shocks which could quickly bring them back into poverty,” according to a 2014 World Bank report.

The new survey, which was completed in May, found that 62 percent of the households questioned had experienced income loss due to the El Nino effects, with a 19 percent net reduction in income overall. The survey also found an 18 percent rate of crop failures.

About 13 percent of households said they had taken additional loans, most of which were “directed toward reinvestment in agriculture, in an attempt to mitigate production losses or crop failures,” researchers reported.

“What is not clear at this time…is whether this is only a temporary loss that households will quickly recover from or whether income losses and increased debt burdens will continue to impact households in the near and medium term,” the report says.

According to government spokesman Phay Siphan, the central bank is working with microfinance institutions to address the financial needs of those recovering from the drought. He directed questions regarding infrastructure to officials at the Ministry of Water Resources, who could not be reached on Tuesday.

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