National Budget Alternatives to Increased Borrowing

By Mu Sochua

On Friday the government  approved the $3.1 billion National Budget for 2013, despite the strong critiques upheld by opposition parties. With actions such as this, the ruling party continues to offer reasons for our concern over Cambodia’s future. The budget law’s proposed spending increase, which will be supported by heavy external borrowing, will enable the government to borrow up to $923 million. This is an outrageously high figure, especially considering this year’s IMF and World Bank report which warned Cambodia that it would enter risky territories if the rate of borrowing continued to increase.

Absent of reform, increased borrowing will heighten the default risk and limit our ability to effectively cope with potential financial crises. Additionally, a system lacking transparency and accountability has already resulted in limited knowledge of the government’s projects, and their respective costs and liabilities. Without transparency, the government’s decision to increase the borrowing limit spells danger for the economy.

The government can support a growing national economy by limiting borrowing to 25 percent of the stated amount for 2013. This was proposed by the opposition parties at the National Assembly budget debate. The opposition pushed for implementing more fiscally responsible measures to increase the nation’s revenues and incomes. Through tough, but fair reforms, we can promote legitimate transactions which will enable the country to appropriately manage its debt, and raise money to cover necessary expenses. Firstly, the opposition debated for the need to toughen our stance against corruption. As a result of a pitiful anti-corruption law and an Anti-Corruption Unit (ACU) that lacks independence from the government branches it was established to monitor, Cambodia is still ranked as one of the most corrupt nations in the world as per the 2012 Transparency International index. In order to be effective, the ACU needs to be an independent and transparent body, supported by increased capacity and outreach, so that it can properly oversee law enforcement. By stamping out corruption, we can ensure that government funds are invested back into supporting the people.

Secondly, The current tax collection system is limiting government incomes and revenues. In 2011, Cambodia collected a minimal 10.1 percent of the GDP in tax revenue. To augment these revenues a more efficient system needs to be developed such that tax payers are more informed about their obligations; the capacity of tax collectors and the skills of auditors are built up; and enforcement of tax collection on Economic Land Conces- sions (ELCs), gasoline imports, custom duties and the tourism sector are toughened. Taxes to casinos should also be increased to 50 percent, to bring approximately $400 million per year to the national budget. Next, with the growth of the demand for land, legitimate ELCs following the Land law should generate additional revenue for the country. A $70 per year fee for the duration of the ELC stands to bring $200 million per year.

Finally, we need to ensure a more efficient use of the budget that directs more resources into education, health, and economic development. By ensuring sustained growth through informed investments, we can support a healthy economy and sustainable future.  By implementing simple, fair and tough reforms, there is no need to increase debt by almost USD$1 billion. The key to success is changing the system to ensure that the welfare of all Cambodians is put ahead of the private interests of corrupt officials and private companies.

Mu Sochua is a member of parliament for the Sam Rainsy Party


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