Speaking in Ho Chi Minh City on Sunday, Prime Minister Hun Sen called on regional leaders attending the World Economic Forum on East Asia to economic stimulus measures as the global economy recovers from the 2008 financial crisis.
“It may be premature at this stage to withdraw our fiscal stimulus in many countries as private investment is yet to become the engine of growth and the poor are still suffering,” said Mr Hun Sen, according to an Internet broadcast of his speech.
In his address, Mr Hun Sen did not mention criticism from economists and activists that government fiscal policy lacked transparency or of the rising budget deficit, which the Asian Development Bank described in April as being fueled too much by the withdrawal of government savings.
Unlike the regional policy makers in attendance at the forum, the Cambodian government has made stimulus spending part of its national budget, essentially obscuring the process and making it hard to quantify, according to Chan Sophal, President of the Cambodian Economic Association.
“The catch in the stimulus spending is that there is a lot we don’t know. We need to have an independent evaluation to have at least a notion of what it really is,” said Mr Sophal.
Because the government has treated stimulus spending not as an “explicit package,” but rather as part of the budget, Mr Sophal said, the flow of money to projects has been hard to quantify and the effectiveness of spending has been impossible to ascertain.
“We planned before we spent and will plan before we spend again,” said CPP lawmaker Cheam Yeap, chairman National Assembly commission on finance and banking, adding that 2010 stimulus spending would mimic 2009’s.
“The government spent money on improving agricultural infrastructure, the health sector, education, the military and a government wage increase” in 2009, said Mr Yeap, adding that this year the government would do more to reduce spending on things such as electricity and fuel.
After averaging 9.8 percent growth for the previous decade, Cambodia’s GDP contracted by an estimated 2 percent in 2009, a decline that, coupled with increased spending, increased the budget deficit to 5.9 percent, according to the ADB’s periodic economic forecast released in March.
The report determined that the effects of stimulus spending on poverty were likely mitigated because of “inadequate targeting.”
“In the long term, a higher deficit will force the government to find alternative forms of funding and decrease its ability to react to crises,” said ADB spokesman Kim Chantha. “To stimulate the economy the government needs to speed up reforms so it can increase the efficiency of its services.”