IMF lauds Kingdom’s early-Covid moves

Content image - Phnom Penh Post
International Monetary Fund (IMF) resident representative for Cambodia Yasuhisa Ojima during a courtesy call on National Bank of Cambodia (NBC) governor Chea Chanto on October 11. SUPPLIED

International Monetary Fund (IMF) resident representative for Cambodia Yasuhisa Ojima is optimistic that Cambodia’s economy will see a quick recovery that reflects the “proactive measures” taken by the government to blunt the socio-economic impacts of Covid-19.

Ojima made the remark on October 11 during a courtesy call on National Bank of Cambodia (NBC) governor Chea Chanto, days after the Washington-based multilateral lender pegged the Kingdom’s economic growth for this year at two per cent.

 

An IMF team led by senior economist Alasdair Scott conducted virtual discussions for the 2021 Article IV consultation with Cambodia during September 13-27.

The development lender underlined that the Covid-19 crisis triggered a sharp fall in external demand last year that dragged down the economy, and that the Kingdom’s third coronavirus outbreak in 2021 – dubbed the “February 20 community event” marking the date it was first detected – further added to the woes.

However, Ojima said, the IMF “is highly optimistic, for the authorities have responded with measures to contain the spread of the virus and support livelihoods”.

The NBC “introduced measures early in the crisis to improve liquidity in the banking system and issued guidance to banks to facilitate loan restructuring as it contributes to the economic growth and the easing the burden of business people and the poor”, he was quoted as saying in a press release issued by the central bank.

The NBC’s Chanto expressed his appreciation for the IMF in Cambodia, lauding the institution for its “significant role” in facilitating the provision of technical assistance as well as human resource development in the Kingdom.

According to the IMF, the Cambodian economy could be expected to grow by around two per cent this year and five per cent in 2022 with extensive government support and a recovery in external demand.

 

“The government rapidly redirected resources to healthcare while rationalising other current spending. It implemented a system of cash transfers to vulnerable households. Loans and guarantees, tax breaks, wage subsidies, and support for retraining were extended to affected businesses.

“A slow recovery is projected. Staff projects growth of 2.2 per cent in 2021, increasing gradually to pre-crisis rates of 6.5 per cent after a few years. Inflation is expected to remain contained. With non-food and energy inflation subdued, overall inflation is projected to continue around three per cent.

“Future growth depends heavily on the course of the pandemic. Faster containment of the virus in Cambodia and other countries will facilitate resumption of tourism; slower progress would damage growth further.

“These risks appear skewed to the downside at this stage. Risks from before the pandemic include the concentration of banking sector assets in real estate. Past droughts and floods have demonstrated the vulnerability to climate change.

“The IMF stands ready to support the authorities’ reform efforts through policy advice and capacity development activities,” it said.

In late August, the IMF announced that Cambodia would receive about $240 million out of the International Monetary Fund’s (IMF) largest-ever distribution of Special Drawing Rights (SDR), equivalent to some $650 billion.

The distribution will aid the Kingdom’s economic recovery and better equip it to contend with the devastating repercussions of Covid-19, and especially the spread of new variants of SARS-CoV-2 – the coronavirus that causes the disease.