Two security guards prepare for a function at the Cambodia Securities Exchange (CSX) in Phnom Penh last year. Hong Menea
The Ministry of Economy and Finance has confirmed plans to issue government bonds this year, intending to raise over $100 million to bolster the national budget and support various investment projects.
Ministry spokesperson Meas Soksensan told The Post that the government intends to issue the debt securities through the National Bank of Cambodia (NBC).
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“In 2024, the government is set to issue sovereign bonds totalling 440 billion riel, equating to about $108 million. The issuance is designed to cover the repayment of principal and interest on last year’s bonds, as well as to fund investment projects,” he stated.
“These projects are expected to directly generate revenue for the government and provide quick returns. The approach is vital for ensuring the efficiency of investment and sustainability in managing public debt and the national budget,” he added.
According to Soksensan, the government requires financing amounting to 4.70% of the gross domestic product (GDP) for 2024. He said the need would be met through domestic financing by issuing government bonds and foreign financing, which will constitute 4.39% of the GDP, equivalent to over $2 billion, aimed at stimulating economic development.
He highlighted that the government began issuing its first sovereign bonds in 2022, totalling $300 million, through the auction mechanism of the central bank.
He noted that in 2023, the issuance of debt securities amounting to $200 million was announced under the national Budget Law (BL).
Sou Socheat, director-general of the Securities and Exchange Regulator of Cambodia (SERC), stated that the decision to issue bonds, including their value and quantity, rests solely with the government.
“Sovereign bonds are financial instruments that enable raising funds locally for various requirements,” he explained.
Socheat noted that government debt securities also serve as a benchmark for other issuances, setting a standard for local bond pricing.
“This offers an excellent opportunity for the market to learn and adapt from these initiatives,” he added.
Ky Sereyvath, an economics researcher at the Royal Academy of Cambodia, said the management of public debt is crucial for developed countries, including the Kingdom.
He highlighted that due to the generally limited capacity for government revenue collection in the country, particularly in the area of tax revenue, the issuance of public debt is effectively akin to citizens depositing money with the government. In return, he said, the government borrows from its people and pays them a specified interest rate.
Sereyvath explained that loans obtained from the populace are primarily used to finance substantial infrastructure projects, such as the construction of roads and bridges.
The use of sovereign bonds, he noted, aids the government in raising local capital for these costly construction efforts, and additionally, it plays an important role in reducing reliance on foreign borrowing.
“This arrangement benefits everyone. Members of public earn interest from the state, while the government secures funds for infrastructure development or other essential expenditures to spur economic growth. Strong support for state bond issuance signifies a successful strategy in reducing external debt,” he stated.
