In the final days of the year, the National Assembly yesterday approved a correction to the 2010 budget authorizing government borrowing from Japan, China and South Korea of more than $300 million to cover cost overruns from previous years.
A seven-page statement submitted to the Assembly by Prime Minister Hun Sen, along with the draft law, said that the additional loans were necessary to meet 2009 and 2010 deficits caused by the global financial crisis, natural disasters and the threat of war.
“After strong effects from the global financial crisis, downturn in the economy, the storm Ketsana and facing the duties of protecting national sovereignty and territory…[the government] has an urgent need of investment capital, which requires the government to create the correctional draft law,” the premier said.
The amounts are expressed as Special Drawing Rights—a unit of currency used by the International Monetary Fund currently valued at $1.53—and rose to an additional 170 million SDR, or $260 million, for shortfalls this year and 30 million SDR, or $45.8 million, for 2009.
The borrowing nearly doubles the 200 million SDR initially approved for this year. On Nov 24, the Assembly voted to pass the 2011 budget, allowing the government to borrow up to 400 million SDR next year.
Eighty of the 102 lawmakers present at yesterday’s session voted to pass the addendum, which was submitted to the Assembly on Dec 13. However, opposition party members said they had not been informed of the amendment.
Before agreeing to debate the budget amendment, senior SRP lawmaker Son Chhay claimed the government had not provided evidence of the need to secure additional loans and expressed concern over the state of national finances.
“Where was the budget spent? And why does the government need extra borrowing? The documents I received did not state clearly where the government spending went,” he said.
He suggested that authorities should focus on improving tax collection instead of looking to foreign lenders for money.
Cheam Yeap, a CPP lawmaker and chairman of the Assembly’s commission on banking and finance, said the government had clearly explained the need to take out more loans in the prime minister’s statement.
Mr Yeap claimed a draft of the amendment was sent to all lawmakers after being received by the Assembly and said Mr Chhay’s claim that opposition lawmakers were not informed made Mr Chhay look “like he just woke up from his sleep.”
Some of the additional loans would be used to strengthen the country’s capacity to defend its borders in case of an attack from Thailand, Mr Yeap said.
“To resist invasion, the government needs to prepare tools and equipment, and strengthen the military,” he said.
Finance Minister Keat Chhon, who spoke on behalf of the government during yesterday’s session, said the additional borrowing would not severely impact on the nation’s finances.
“The government has its own principles of borrowing, under which the government borrows only financing. We invested them in fiscal infrastructure such as road construction, irrigation and electricity transmission,” he said, adding that the loans were from China, South Korea and Japan.
He said that the government would be careful to ensure favorable conditions when borrowing. By only taking out certain types of international loans, the government will only need to pay back 65 percent of the amount it borrows, he said.