Domestic revenue a vital source of development financing: UN report

Content image - Phnom Penh Post
Domestic revenue is an increasingly vital source of financing for development in the Kingdom, amounting to 19 per cent of gross domestic product (GDP) last year and expected to reach 22.5 per cent by end-2025. Hong Menea

Domestic revenue is an increasingly vital source of financing for development in the Kingdom, amounting to 19 per cent of gross domestic product (GDP) last year and expected to reach 22.5 per cent by end-2025, the UN said on July 16.

The UN Development Programme (UNDP) made the remark based on a report, entitled “Cambodia’s Development Finance Assessment” released on the same day.

 

The study, it said, “analyses the compositions and trends of all Cambodia’s financial inflows, covering public, private, international and national sources available to support development investment in the country” and “estimates the likely reductions in these flows resulting from the Covid-19 crisis”.

“While official development assistance [ODA] flows remain significant – estimated around 7.9 per cent of GDP – their composition has shifted further towards loans and within this towards less concessional terms.

“Covid-19 has led to total financing flow losses estimated to be $3.6 billion, accounting for 19.8 per cent of the total flows, for 2020. The three most significantly affected are domestic revenue, foreign direct investment [FDI] and private domestic investment.

“The report also emphasises the importance of a set of financing policy innovations to boost the capacity of the state to manage the public finances and secure ongoing high levels of private capital flows. This underscores some of the green financing mechanisms that should be explored to achieve the Sustainable Development Goals [SDG],” the UN agency said.

UNDP Cambodia resident representative Nick Beresford lauded the report as the most spot on illustration of the Kingdom’s anticipated financial inflows achieved by such a comprehensive overview.

“Once we are able to ease Covid-19 restrictions, we can expect a strong growth in development finance flows. Within those flows, domestic sources are becoming increasingly important.

 

“Cambodia can expect to graduate from Least Developed Country [LDC] status towards the end of the 2020s. The time to prepare new sources of financing is now as this report makes clear. For example, being able to issue bonds in Khmer riel, is an option being considered, and one strongly supported by UNDP,” he said.

Ministry of Economy and Finance secretary of state Ros Seilava emphasised that the government “plans to launch the Post Covid-19 Economic Recovery Plan 2021-2023 which will be financed by public resources while also considering mobilising additional resources from other financing options, thus this report will provide us some insights into different financing options”.

Seilava welcomed policy recommendations in the report as “another contribution of [the] UNDP to provide evidence-based policy recommendations” for the government.