Describing Cambodia’s 1970s wartime debt to the US as “dirty,” Prime Minister Hun Sen said yesterday he would personally ask US officials to cancel the debt when he visits New York this week.
The premier is scheduled to meet US President Barack Obama tomorrow in New York during a US-Asean meeting.
Mr Hun Sen’s government has long requested that the US forgive the defaulted debt accrued by Lon Nol’s US-backed Khmer Republic. With interest, the debt has risen to $339 million by 2007.
Speaking in Phnom Penh at a toll bridge inauguration, the premier said that many of the funds were stolen by republican officials and were used to help finance the civil war, which devastated the country.
“The debt Cambodia owes the United States from 1970 to 1975 is judged as dirty debt, and I will ask them to cancel it,” he said. “Please prepare the documents for me and I will talk to the US about it.”
While visiting Cambodia in February, US Ambassador to Asean Scot Marciel said only US lawmakers could cancel the debt, though the US government had long been open to rescheduling it.
A statement yesterday from the US Embassy in Phnom Penh reiterated the US government’s long-held position that under international law governments are responsible for the debts of their predecessors.
“We have made some proposals that we think would help resolve the issue consistent with our overall commitment to support Cambodia’s economic modernization,” the statement said.
“We hope that an agreement can be reached soon. Such an agreement would enhance Cambodia’s creditworthiness and ability to access international capital markets,” according to the statement.
However, Stephen Higgins, CEO of ANZ Royal Bank, said he doubted that Cambodia’s position on the debt would affect the country’s credit-worthiness.
“Having a default is not ideal. However, I suspect most investors would take the view that Cambodia is morally right in this instance,” he said. “It’s a slight negative, but I don’t see it as insurmountable.”
According to a December 2009 report by the International Monetary Fund, Cambodia, after making agreements on several international debts under the 1995 Paris Club of creditor nations, still is in default for substantial amounts to the Russian Federation and the US.
“Currently, Cambodia is not servicing its debt with either of these creditors, and efforts to conclude agreements with each under the framework of the Paris Club are required,” according to the report.
The debt originates from the US Department of Agriculture’s financing of $274 million in purchases of US commodities by the Khmer Republic from 1972 to 1974. The money helped the Lon Nol regime divert Cambodian funds toward the war effort, as the republic was an ally in the US war to stop the spread of communism.
Ministry of Finance Secretary Hang Chuon Naron, declined to comment yesterday through an SMS, calling the issue “too sensitive.”
When speaking about the debt, government officials in the past have noted that the US government is responsible for the illegal and devastating bombing of the country from 1969 to 1973, and they have raised the possibility of compensation.