People cross the Bassac River via the newly opened Koh Pich-Koh Norea Bridge in the capital in November. Heng Chivoan
Cambodia signed concessional loan agreements with development partners for nearly $230 million in Q3 2023. This increased public debt to more than $10 billion, of which over 99% is foreign, with the country paying off more than $190 million in obligations during the period.
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Economists believe that the government is capable of repaying the loans, asserting that they are being utilised both accurately and efficiently.
According to the Cambodia Public Debt Statistical Bulletin released by the Ministry of Economy and Finance last weekend, the country’s total debt stock at the end of Q3 2023 stood at $10.72 billion.
The sum consists of 99.5% public external debt (approximately $10.67 billion), split between 64% from bilateral Development Partners (DPs) and 36% from multilateral DPs. The remaining 0.5% (about $51.99 million) is public domestic debt.
The bulletin further detailed the composition of public debt stock: 47% in US dollars, 20% in Special Drawing Rights (SDR), 11% in Chinese yuan, 11% in Japanese yen, 7% in euros and the remaining 4% in local and other currencies.
According to the ministry, the government signed concessional loans valued at $228.07 million in Q3 2023, equivalent to SDR 173.07 million.
From January to September 2023, the government signed loans worth $1 billion, equivalent to SDR 762.52 million. This accounts for about 45% of the legally permitted ceiling (SDR 1.7 billion), with approximately 45% and 55% from bilateral and multilateral DPs, respectively. This reflects a decrease by 17% compared to the same period in 2022.
“Overall, the loans are highly concessional, with an average grant element of around 43%. The purpose of these signed loans is to finance public investment projects in priority sectors that support long-term sustainable economic growth and increase economic productivity or production,” stated the report.
In the first nine months of 2023, the government repaid $437.56 million in debt, including approximately $426.68 million in public external debt (comprising $328.83 million in principal and $97.85 million in interest and other fees) and about $10.88 million in public domestic debt (comprising $10.11 million in principal and $0.77 million in interest).
The debt repayments for the period increased by about 8% compared to the same period in 2022.
The government paid $190.2 million in debt service in Q3 2023.
Hong Vanak, an economics researcher at the Royal Academy of Cambodia, acknowledged on December 11 that while accruing debt is generally not favourable, it is essential for poor or developing countries striving to enhance their international standing.
He said such countries require credit to bolster their national economic growth through building human resource capacity, public investment for job creation and infrastructure development.
Vanak noted that the country’s current loans are being effectively and properly utilised by the government.
He emphasised that creditors thoroughly evaluate several key factors before granting a loan, including the loan’s purpose, debt ceiling, repayment procedures, repayment history and the borrower’s ability to repay.
“I believe the government possesses the capability to regularly repay its creditors, as [they] conduct thorough studies and make predictions prior to extending credit,” he said.
With the implementation of a strategic plan and the government’s commitment to transitioning the Kingdom into a high-income country by 2050, Vanak is optimistic that the current credit situation will not pose future obstacles.
Finance minister Aun Pornmoniroth previously stated that the country’s current public debt situation is manageable and considered “sustainable” and “low risk”, despite challenges posed by the Covid-19 crisis and other external factors.
“Maintaining the sustainability of public debt hinges on Cambodia having a robust public debt management system. This encompasses a legal framework, policies, strategies and procedures to manage all operational aspects; sufficient institutional and human resource capacity; and information technology systems for managing operations and data storage, which are crucial for debt risk analysis and monitoring,” he explained.
An International Monetary Fund (IMF) report released in April predicts that Cambodia’s overall government debt will rise to 37.5% of its gross domestic product (GDP) in 2023, up from 36.5% in 2022.
The rate is lower than many other ASEAN members. According to the report, the Kingdom’s debt in 2023 is projected to be lower than Laos’ (123%), Myanmar (61.3%), Singapore (134.5%), Thailand (61%), Malaysia (67%), Indonesia (39.1%) and the Philippines (56.7%), but slightly higher than Vietnam at 36.3% and Brunei which is reported to be debt-free.
