International Monetary Fund Country Representative Mario de Zamaroczy on Thursday outlined a plan for privatizing the Foreign Trade Bank while discussing $10.8 million the IMF is releasing as part of its ongoing program to strengthen Cambodia’s bank reserves.
The switchover of the Foreign Trade Bank, which is a department of the National Bank of Cambodia, may be completed by the end of 2001.
The IMF says the change would strengthen Cambodia’s financial system.
Under the plan, the Foreign Trade Bank would become a separate legal entity with a separate staff working under a new executive board.
Even the bank itself would be relocated.
“The bank will have to be capitalized and apply for a license like any other bank,” de Zamaroczy said. “But as one of only two banks in Cambodia that operates in riel, it might be ideally positioned to move into the provinces and create a banking system that covers more than just the major cities.”
De Zamaroczy said 29 of 31 Cambodian banks have now submitted applications for licenses under the new stricter system for operations and capitalization. The decisions on licensing should be made in November.
De Zamaroczy also voiced concern over the government’s tardy disbursement of funds in the areas of health and education.
Citing figures through the end of August, de Zamaroczy said the government should have already distributed two-thirds of the money earmarked this year for social services, but was lagging far behind. He particularly cited the Ministry of Health as having distributed only 35 percent of its disbursements.
The amount of money Cambodia spends on defense remains a concern. According to de Zamaroczy, in 1998 the country spent 2.9 percent of its gross domestic product on defense (excluding security). The IMF would like to see that figure reduced to 2 percent by 2002.
He said one reason defense spending remained high was that promised donor money to help the government demobilize 31,500 troops by the year 2002 was slow in arriving. He blamed the delay on “the international bureaucracy” of moving money from overseas donors into trust funds on which the government can draw.
De Zamaroczy said the IMF was satisfied with the government’s financial performance in 2000, citing a broadened value-added tax, increased tourist revenues, better collection of arrears from the telecommunication companies and leases of state assets and improved customs and tax administration.
But he said the government would be hard-pressed to match its 5 percent economic growth of 1999, given the costs of flood relief and the high price of oil.
This is the second $10.8 million disbursement by the IMF. The plan is to release the same amount every six months for three years, for a total of approximately $81.6 million.
De Zamaroczy said that just as important as the money is the “seal of approval” the IMF loans, with interest rates around 0.5 percent, signal to the rest of the donor community.