A secretary of state at the Ministry of Finance on Tuesday said that as Cambodia’s economy grows, it should expect a serious reduction in the amount of grants it receives and will in turn have to take on more sovereign debt.
During a workshop on the 2015 draft budget at the National Assembly, Vongsey Vissoth said that since Cambodia’s economy has improved in recent years, it will no longer receive as many grants from foreign countries and organizations.
“They offered us more grants before 2011 and 2012; now they will stop giving them to us,” Mr. Vissoth said.
He added that in 2014, 20 percent of the country’s revenue came from grants and that another 20 percent came from loans.
Mr. Vissoth estimated that grants would fall by 15 percent in 2015, but stressed there will still be plenty of opportunities for Cambodia to keep borrowing.
“We will feel pressured in the future [to take on more debt] because we still need investment in major infrastructure,” he said.
Cambodia has been borrowing heavily from China in particular, and Mr. Vissoth estimated that the government currently owes about $2.3 billion to Beijing.
In the 2015 draft budget, the government plans to borrow $888 million from foreign countries but does not specify which ones.
With the coming drop in grants, Mr. Vissoth said tax revenue would help fill in the gap.
“Our tax revenue…is similar to the Philippines now” as a proportion of GDP, he said. “We have more than Burma and Indonesia, but we have less than Laos, Vietnam and Thailand.”
Since the 2015 draft budget’s release in October, the opposition CNRP has been calling for more details about where the proposed $3.8 billion will go before the Assembly votes on it in December.
The Finance Ministry’s four-hour presentation Tuedsay was still scant on such details.
CNRP spokesman Yim Sovann said he was not as optimistic about tax revenues as the government.
“Cambodia needs to mobilize local revenue,” he said. “Tax revenue is only 12 or 13 percent of GDP while in neighboring countries it is 20 to 25 percent.”
(Additional reporting by Chris Mueller)