Cambodia's 34-per-cent public debt-to-GDP (gross domestic product) ratio at end-2022 remains relatively low, which analysts say suggests that the underlying funds have been used effectively for decades to develop the country and bolster rapid economic growth.

In a report issued at a public forum on macroeconomic management and the 2023 budget law, the Ministry of Economy and Finance put the Kingdom’s end-2022 public debt stock at $9.97259 billion – $9.95508 billion from external sources and “nearly $20 million” from sovereign bond sales.

China represented the largest share of these external sources, at 40 per cent, followed by other bilateral sources (22%), the Asian Development Bank (21%), the World Bank (9%), “old debt” (6%), and other multilateral sources (2%), the report said.

The ministry defines “old debt” as that “incurred before 1993”, and hence “inherited from the previous governments”.

Cambodia’s public debt-to-GDP ratio was the lowest in ASEAN, after Brunei which has no external debt, the ministry noted.

Speaking at the forum, ministry permanent secretary of state Vongsey Vissoth revealed that Cambodia’s public debt per capita was “about $600”, compared to the US’ “nearly $100,000”, given its “over 120 per cent” public debt-to-GDP ratio.

Royal Academy of Cambodia economics researcher Ky Sereyvath highlighted the positive correlation between the debt-to-GDP ratio and the level of foreign borrowing to stimulate investment, development and the economy.

He assured that these and other figures released by the finance ministry indicate that “we have used this debt effectively, which is reflected in the development of the country and its economy”, he said.

American Chamber of Commerce in Cambodia (AmCham) president Anthony Galliano noted that the government’s budget is also roughly equivalent to 30 per cent of GDP, “with use of funds generally for government employees and infrastructure, defence and security, education, and health.

“Additionally, the budget has provisioned for the Southeast Asian [SEA] Games and preparation for [a] successful 2023 general election, [which are] special one-off items,” he said.

“Fortunately, in 2023, the spending related to [the] Covid-19 crisis will reduce substantially, as it is believed to be approximately $2.2 billion from 2020-2022, or about three-fifths of Cambodia’s state savings.

“The government continues to invest in infrastructure and education which is a key in advancing economic prosperity, and domestic and foreign investment. The Kingdom is borrowing at very reasonable interest rates, for a first time sovereign issuer, which demonstrates the strength of Cambodia’s creditworthiness and investor confidence.

“To attract more foreign investors to invest in the Kingdom’s sovereign debt, especially major players in the pension and managed-funds space, it is likely that rates will need to be more attractive than they are currently.

“For example Cambodia’s debt is trading basically equivalent to US debt, and the credit ratings are material[ly] different. Higher interest rates will potentially be required to tap international investor interest,” he said.

As per the 2023 budget law, the government plans to spend 39.206 trillion riel ($9.6 billion) this year, $7.2 billion of which will be sourced from its revenues, $1.8 billion from loans, and $600 million from its savings.

Vissoth noted that external sources’ share of financing for government expenditures had dropped from “as high as 75 per cent” in 1995, to just over 17 per cent, which he hailed as a measure of self-sufficiency.