After a three-year absence, one of the world’s most influential development institutions might soon resume financial assistance to Cambodia if an International Monetary Fund delegation is impressed next week with the government’s commitment to reform, Ministry of Finance and National Bank officials said.
Cambodia has asked the IMF for a three-year package of about $80 million worth of loans to support the cash-strapped national budget, financial officials said. The upcoming talks between government officials and the delegation would be the final before the IMF’s Board of Executives is to consider resuming of assistance to Cambodia at a September board meeting, officials said.
Assistance has been “suspended” since late 1996, when IMF officials decided they had had enough of the empty reform promises from the government.
Several Finance Ministry officials said, however, the delegation is scheduled to arrive in Phnom Penh on Monday and have its first official meeting with government officials Wednesday. The two parties are expected to discuss aspects of economic reform, ranging from banking to demobilization of soldiers and illegal logging, they said.
National Bank Deputy Governor Sum Nipha implied those reforms are required by the IMF as pre-conditions for aid.
“We are still waiting for a mission’s appraisal on our policy frame work,” she said. “We will see what will be the next step when they come.”
The IMF canceled a $20-million installment of its three-year $120 million loan in late 1996, citing a lack of progress by the government to control illegal logging and collect revenues for the budget. In March 1997, the government and the IMF drew up an economic policy plan, indicating what reforms would be necessary for the resumption of the loan.
Next week’s visit is a follow-up to a mission in May. At that time, IMF officials told the donor community that another delegation will visit Cambodia before the IMF board meets in September to consider resumption of the loan, diplomats said.
Donors see the IMF’s possible resumption of aid a positive signal for the international community and private investors.
An Asian diplomat said that the IMF assistance would act as a guarantee to maintain the repayment of money Cambodia owes for past loans. It also would help maintain the value of the riel, which would provide financial security for investors, he said.
A Western diplomat agreed the IMF’s return would give confidence to the rest of the donor community and to businessmen.