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Cambodia: Staff Report For The 2011 Article IV Consultation—Debt Sustainability Analysis1

Author(s):
International Monetary Fund
Published Date:
February 2012
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1. Cambodia’s DSA indicates that the risk of debt distress is low. Under the baseline macroeconomic outlook (Box 1), including assumptions on growth and fiscal consolidation, external debt burden indicators do not breach the relevant indicative thresholds. These thresholds are higher than in the 2010 DSA, given Cambodia’s recent upgrade as a medium performer based on the World Bank’s CPIA measure of institutional capacity.

2. Staffs have analyzed an additional country-specific alternative scenario of increased bilateral external borrowing. Assuming a doubling of external borrowing from the baseline over 2011–21 on less concessional terms than those from multilateral donors, this scenario indicates that the scope for absorbing risks would be significantly reduced and Cambodia would lose its low debt distress rating.

3. At the end of 2010, Cambodia’s external public and publicly guaranteed (PPG) debt stock was 28 percent of GDP in nominal terms and 20 percent in net present value (NPV) terms. Until 2008, strong economic growth and favorable external conditions contributed to a decline in debt ratios. However, in 2009, the external PPG debt ratios rose, partly reflecting an increase in the overall fiscal deficit against the backdrop of the global recession. For 2011, the debt stock in PV terms as a share of GDP, as a share of exports of goods and nonfactor services, and of government revenues is projected at 20 percent, 39 percent and 154 percent, respectively. The past DSA (2010) baseline macroeconomic scenario broadly matches the macroeconomic developments, with slightly higher-than-projected growth outcome in recent years, but no tangible impact on debt dynamics.

Cambodia: External Public Debt Indicators at end-2010
Indicative

Thresholds
End-

2010
NPV of debt, as a percent of:
GDP4020
Exports15040
Revenue250149
Debt service, as a percent of:
Exports201
Revenue305
Sources: IMF and World Bank.
Sources: IMF and World Bank.

4. Around half of Cambodia’s external debt is held by multilateral creditors. primarily the AsDB (27 percent) and the World Bank’s IDA (18 percent). China is the largest emerging creditor, accounting for about 66 percent of total bilateral disbursements in 2010. Cambodia remains in arrears to the Russian Federation and the United States. Following a Paris Club agreement in 1995, Cambodia concluded agreements with France, Germany, Italy, and Japan. The status of negotiations of outstanding debt obligations with the Russian Federation and the United States has effectively remained unchanged since the last DSA. Currently, Cambodia is not servicing its debt with either of these creditors, and efforts to conclude agreements with each under the framework of the Paris Club are required. Since prospects for resolution are unclear, the current DSA assumes no restructuring in its baseline, with arrears continuing to build up throughout the projection period.

Cambodia: Stock of Public and Publicly Guaranteed External Debt at End-2010
As a Share

of External

Total Debt
In percent

of GDP
Total10028
Multilateral4914
Bilateral5114
Of which: Non-
rescheduled debt with
the U.S. and Russian
Federation247
Sources: Cambodian authorities; IMF and World Bank estimates.
Sources: Cambodian authorities; IMF and World Bank estimates.

Box 1.Cambodia: Macroeconomic Assumptions Underlying the DSA (2011–31)

The Cambodian economy has performed well in 2011 with overall growth at slightly below 6 percent. on the back of robust garment exports, rising tourism income, and a recovering real estate sector. The recent severe flood is a temporary setback, but agricultural activity should revert back to trend by 2012, pushing GDP growth to 6½ percent.

Inflation is projected to average 5.6 percent in 2011, before gradually declining toward 3 percent in the medium term.

The potential growth rate of Cambodia in the medium and longer terms has been upgraded to 7–8 percent, on the assumption that Cambodia will continue implementing necessary reforms in a steadfast and evenhanded manner (for detailed analysis of the drivers of potential growth see Box 3 in the accompanying staff report). There has been some encouraging progress, such as a rising global market share in garment exports, large investments in hydropower projects that soon will substantially lower the cost of electricity in Cambodia which remains three times as high as in neighboring countries, and an emerging diversification of FDI beyond the garment manufacturing sector.

The external current account deficit (including official transfers) is projected to be above 9 percent of GDP during 2011–13, before trending toward 5 percent of GDP in the longer term. A higher current account deficit in the short term reflects high import contents of the build-operate-transfer (BOT) hydropower projects, which are incorporated in the macroeconomic framework from 2011 onward. These imports are fully financed by corresponding FDI flows. As the construction of these power plants is completed, FDI as a share of GDP should stabilize at around 6 percent, while imports of construction materials and petroleum for electricity production should also level off. Official transfers including loans and grants are programmed to continuously decline as a percentage of GDP in line with rising per capita income. With a positive outlook for export competiveness and FDI, and a narrowing current account deficit in the longer term, gross official reserves in months of next year’s imports are expected to gradually rise from 4.3 months in 2011 toward 5 months in the long run.

Projected fiscal consolidation is an important anchor of macroeconomic stability in the medium term and beyond. The overall fiscal deficit in terms of GDP (excluding grants) is expected to narrow from about 6 percent in 2011 to less than 4 percent in 2016, before gradually falling to 2½ percent by 2031. Revenue would be the main driver of consolidation and is expected to rise to over 14 percent of GDP (excluding grants) by 2016 from about 12 percent of GDP in 2011 in line with targets adopted in the PFM reform program. Revenue (excluding grants) is assumed to increase to 16½ percent of GDP over the long term, implying that gaps in the productivity of Cambodia’s tax system vis-à-vis regional peers would gradually be closed. Public expenditure would remain mostly at around 18 percent through the medium term, and kept below 19 percent up to 2031

EXTERNAL DEBT SUSTAINABILITY ANALYSIS

5. All external debt indicators remain below the policy-dependent debt burden thresholds under the baseline scenario, and no thresholds are breached under standardized stress test. The main results of the external DSA are as follows:

  • All debt indicators in the baseline scenario are expected to decline over the 20-year projection period (Table 1a). During the projection period, the PV of the debt-to-GDP ratio decreases from 20 percent in 2011 to about 14 percent in 2031 (compared to an indicative threshold of 40 percent), while the PV of the debt-to-exports ratio decreases from 39 percent in 2011 to 27 percent in 2031 (compared to an indicative threshold of 150 percent). The PV of the-debt-to-revenue ratio declines from 154 percent in 2011 to 80 percent in 2031 (indicative threshold: 250 percent). The debt service-to-exports and debt service-to-revenue ratios stay well below the indicative thresholds throughout the entire projection period due to concessionality of previous debts.
  • The standard stress tests do not reveal any serious vulnerability (Table 1b and Figure 1). A one-time 30 percent depreciation and the shock to exports push the NPV of debt-to-revenue ratio to 212 and 219 percent respectively, highlighting the need for improved revenue performance.

Figure 1.Cambodia: Indicators of External Debt Under Alternative Scenarios, 2011–31 1/

Sources: Cambodian authorities; and staff estimates and projections.

1/ The most extreme stress test is the bound test that yields the highest ratio in 2021. In figure b. it corresponds to a one-time depreciation shock; in c. to an export shock; in d. to a one-time depreciation shock; in e. and f. to an exports shock.

Figure 2.Cambodia: Indicators of Public Debt Under Alternative Scenarios, 2011–31 1/

Sources: Cambodian authorities; and staff estimates and projections.

1/ The most extreme stress test is the bound test that yields the highest ratio in the outer years. In figures a., b., and c., they correspond to permanent shock to growth

2/ Revenues are defined inclusive of grants.

6. An additional country-specific alternative scenario considers the impact of increased borrowing (Tables 3a and 4a). This scenario illustrates how increased borrowing (US$880 million during 2011–21, about double the amount envisaged under the baseline scenario) under consideration by the authorities can affect debt sustainability.3 The terms for most of this additional borrowing are assumed to be comparable to bilateral loans from emerging donors: 60 percent of the loans are at 2 percent interest rate with grace period and maturity of 7 and 20 years.4 With no information on the nature or the type of projects to be financed in the higher borrowing scenario and the fact the potential growth has already been upgraded since the last DSA to 7–8 percent, the alternative scenario does not assume any “growth dividends.” Limited administrative capacity of the government to manage debt-financed capital investment and challenges in public financial management would further reduce the likelihood of any growth dividend. The main results under this borrowing scenario are as follows:

  • There would be a significant accumulation of external debt, with the total debt stock rising to 38 percent of GDP (NPV of debt-to-GDP at 29 percent) over the medium term.
  • In several bound tests, the indicative thresholds are breached for a prolonged period of time (Figures 3 and 4). The increased borrowing would therefore push the debt distress rating from low to moderate.
  • Moreover, the return to sustainable debt levels would become more difficult if contingent liabilities, which tend to correlate with shocks under the bound tests, were triggered. Given the large exposure to BOT projects as noted in the accompanying staff report, if problems in only 1 out 10 BOT projects arose potentially leading to a total loss of investment costs, an additional 5 percent of GDP would be added to the debt stock. Similarly, based on international experience, a banking crisis for a country with a financial depth as in Cambodia during the DSA projection period could add about 10 percent of GDP to public debt.5
  • Apart from impairing Cambodia’s ability to absorb shocks, the scenario also underscores the need to raise tax revenue as planned. If the revenue-to-GDP ratio stagnates, higher fiscal deficits would push public debt close to the sustainability threshold.

Figure 3.Alternative Scenario of Increasing Borrowing Limits, Indicators of External Debt, 2011–31 1/

Sources: Cambodian authorities; and staff estimates and projections.

1/ The most extreme stress test is the bound test that yields the highest ratio in 2021. In figure b. it corresponds to a one-time depreciation shock; in c. to an export shock; in d. to a one-time depreciation shock; in e. to an exports shock; and in figure f. to a one-time depreciation shock.

Figure 4.Alternative Scenario of Increasing Borrowing Limits, Indicators of Public Debt, 2011–31 1/

Sources: Cambodian authorities; and staff estimates and projections.

1/ The most extreme stress test is the bound test that yields the highest ratio in 2021. In figures a. and b., they correspond to permanent shock to growth, and for c. it corresponds to a one time depreciation in 2011.

2/ Revenues are defined inclusive of grants.

PUBLIC DEBT SUSTAINABILITY ANALYSIS

7. Given the predominance of external debt, public debt dynamics closely track that of the external debt. Cambodia does not have, and is not expected to have in the foreseeable future, a market for domestic government debt securities.

8. The nominal stock would increase modestly to 29 percent of GDP (21 percent of GDP in NPV terms) by end-2011 and then gradually decline after 2012. reflecting the fiscal consolidation envisaged under the baseline over the medium term (Table 2a). The PV of public debt-to-GDP ratio and the public debt service-to-revenue ratio would decline gradually over the long term to 14 percent and 64 percent respectively. The debt service-to-revenue ratio remains low in most scenarios for the entire projection period under the baseline.

9. Public debt dynamics are adversely affected by a permanent growth shock and accommodative fiscal stance. Under a permanent growth shock, the level of public debt (as a share of GDP) continues to rise to over 35 percent of GDP (in PV terms). If the primary balance remains unchanged at 2011 level, the PV of public debt-to-GDP continues to rise to 28 percent increase by 2025 and then declines gradually (Table 2b).

DEBT MANAGEMENT

10. The authorities are close to finalizing their formal debt strategy. Staffs welcomed the significant progress in designing a public debt strategy and the creation of a high-level (seven-member) government committee on public debt management, chaired by the Minister of Economy and Finance and co-chaired by the Governor of the National Bank of Cambodia. The debt strategy considers alternative borrowing plans and assesses associated risks. The debt unit at the MEF is also building its capacity, including through TA provided by the AsDB, for analyzing contingent liabilities from the BOT projects and the financial sector. The authorities also acknowledge the importance of a comprehensive approach to debt management, a transparent and objective management of investment projects, and the need to maintain concessionality of new borrowing. Once finalized, the debt strategy is expected to be published in early 2012.

VIEWS OF THE AUTHORITIES

11. The authorities were in broad agreement with the DSA. They underscored that government borrowing would be undertaken only for investment in a few critical sectors (e.g., infrastructure such power, roads, ports, irrigation) and that they would strengthen capacity to assess the budgetary, debt, and growth implications of investment projects. They also welcomed suggestions to strengthen monitoring BOT projects with a view to minimizing fiscal risks. Regarding the alternative scenario with higher borrowing, the authorities concurred that elevated borrowing would lead to Cambodia’s losing the low distress rating.

CONCLUSION

12. In the staffs’ view, Cambodia is at low risk of debt distress based on external indicators under the baseline scenario and the higher thresholds as a medium performer. The baseline projections and the associated standard stress tests show limited risk related to external debt given that none of the indicators breaches the indicative debt burden thresholds. However, in view of Cambodia’s low domestic revenue base, risks to total debt and debt service need to be managed through further strengthening revenue efforts over the medium term.

13. The increase in debt ratios under an alternative scenario with a higher borrowing path highlights the need for a prudent borrowing strategy and careful management of public debt. This exercise also underscores the importance of effective management of new debt accumulation and any contingent liabilities from the rapidly growing BOT projects and the financial sector. Increased borrowing will significantly reduce the government’s ability to tackle any future crises within the sustainability thresholds.

14. The staffs encourage the authorities to build on recent steps and move forward as quickly as possible to strengthen debt management capacity. In this regard, it will be important to continue the work under way to develop and implement a comprehensive debt management strategy and to closely monitor the contingent liabilities from the BOT projects and the financial sector.

Table 1a.Cambodia: External Debt Sustainability Framework, Baseline Scenario, 2008—31 1/

(In percent of GDP, unless otherwise indicated)

ActualProjections
HistoricalStandard2011-162017-31
200820092010Average 1/Deviation 1/201120122013201420152016Average20212031Average
External debt (nominal)2/27.028.527.628.128.127.928.227.827.224.318.4
Of which: Public and publicly guaranteed (PPG)27.028.527.628.128.127.928.227.827.224.318.4
Change in external debt−2.41.5−0.90.50.0−0.20.3−0.4−0.6−0.4−0.9
Identified net debt-creating flows−8.0−1.7−4.8−2.3−0.9−1.4−1.8−2.0−2.9−2.7−1.9
Noninterest current account deficit4.33.23.82.31.49.29.89.06.56.15.45.15.55.0
Deficit in balance of goods and services9.28.48.311.210.19.47.06.86.57.16.7
Exports48.543.449.351.551.051.652.553.354.153.953.8
Imports57.751.857.662.761.161.059.660.160.661.060.5
Net current transfers (negative = inflow)−9.3−9.5−8.9−10.00.8−5.9−4.3−4.3−4.4−4.4−4.5−4.1−3.6−4.0
Of which: Official−6.6−6.7−6.8−3.8−2.0−1.8−1.7−1.5−1.4−0.8−0.3
Other current account flows (negative = net inflow)4.44.34.44.04.03.93.83.73.42.22.4
Net FDI (negative = inflow)−7.7−5.0−6.8−4.43.6−10.4−9.3−9.0−6.9−6.6−6.8−6.5−6.3−6.4
Endogenous debt dynamics3/−4.70.1−1.8−1.2−1.4−1.3−1.4−1.5−1.5−1.4−1.1
Contribution from nominal interest rate0.20.30.30.30.30.30.30.40.40.30.3
Contribution from real GDP growth−1.60.0−1.6−1.4−1.7−1.6−1.7−1.9−1.9−1.7−1.4
Contribution from price and exchange rate changes−3.2−0.1−0.6
Residual (3-4)4/5.63.23.92.80.91.12.11.62.32.31.0
Of which: Exceptional financing0.0−0.2−0.2−0.1−0.1−0.1−0.1−0.1−0.10.00.0
Present value (PV) of external debt 5/19.520.220.420.220.620.319.918.114.3
PV of external debt (in percent of exports) 5/39.539.239.939.239.238.136.933.526.7
PV of PPG external debt19.520.220.420.220.620.319.918.114.3
In percent of exports39.539.239.939.239.238.136.933.526.7
In percent of government revenues149.0154.0151.1145.2142.0137.2131.2110.079.7
Debt service-to-exports ratio (in percent)1.21.51.41.21.21.41.61.62.01.71.7
PPG debt service-to-exports ratio (in percent)1.21.51.41.21.21.41.61.62.01.71.7
PPG debt service-to-revenue ratio (in percent)4.35.35.34.84.75.15.75.97.05.75.2
Total gross financing need (in billions of U.S. dollars)−0.3−0.1−0.3−0.10.20.10.10.1−0.1−0.10.1
Noninterest current account deficit that stabilizes debt ratio6.71.74.78.79.89.26.26.56.05.66.3
Key macroeconomic assumptions
Real GDP growth (in percent)6.70.16.08.13.65.86.56.46.87.47.46.77.67.87.7
GDP deflator in U.S. dollar terms (change in percent)12.30.52.03.73.87.64.03.12.92.72.83.92.42.52.5
Effective interest rate (percent) 6/0.81.11.11.10.11.11.11.21.31.41.51.31.51.61.5
Growth of exports of G&S (U.S. dollar terms, in percent)7.3−10.022.812.412.618.99.611.211.812.111.912.610.010.610.3
Growth of imports of G&S (U.S. dollar terms, in percent)12.1−9.820.311.610.723.88.09.77.311.311.211.99.710.810.4
Grant element of new public sector borrowing (in percent)25.527.530.827.328.728.728.127.022.626.0
Government revenues (excluding grants, in percent of GDP)13.012.013.113.113.513.914.514.815.216.418.017.0
Aid flows (in billions of U.S. dollars) 7/0.60.70.60.50.60.60.60.70.70.91.4
Of which: Grants0.30.40.60.40.40.40.50.50.50.71.3
Of which: Concessional loans0.20.20.00.10.10.20.20.20.20.20.2
Grant-equivalent financing (in percent of GDP) 8/4.13.83.63.63.33.22.61.72.3
Grant-equivalent financing (in percent of external financing) 8/62.063.967.560.363.662.759.458.859.1
Memorandum items:
Nominal GDP (in billions of U.S. dollars)10.410.411.312.814.215.617.118.920.934.191.5
Nominal dollar GDP growth19.80.68.113.910.89.79.910.410.410.810.210.410.4
PV of PPG external debt (in billions of U.S. dollars)2.32.62.93.13.53.84.26.213.1
(PVt-PVt-1)/GDPt-1 (in percent)2.92.31.82.41.91.72.21.61.11.4
Gross remittances (in billions of U.S. dollars)0.30.30.20.30.30.40.50.50.61.10.9
PV of PPG external debt (in percent of GDP + remittances)19.119.819.919.720.019.819.317.514.2
PV of PPG external debt (in percent of exports + remittances)37.837.638.237.437.336.234.931.626.2
Debt service of PPG external debt (in percent of exports + remittances)1.31.21.21.31.51.61.81.61.7
Sources: Cambodian authorities; and staff estimates and projections.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Includes both public and private sector external debt. The years in the table refer to calendar years.

Derived as [r - g - ρ(1+g)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms.

Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections, also includes contribution from price and exchange rate changes.

Assumes that PV of private sector debt is equivalent to its face value.

Current-year interest payments divided by previous period debt stock.

Defined as grants, concessional loans, and debt relief.

Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).

Sources: Cambodian authorities; and staff estimates and projections.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Includes both public and private sector external debt. The years in the table refer to calendar years.

Derived as [r - g - ρ(1+g)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms.

Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections, also includes contribution from price and exchange rate changes.

Assumes that PV of private sector debt is equivalent to its face value.

Current-year interest payments divided by previous period debt stock.

Defined as grants, concessional loans, and debt relief.

Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).

Table 1b.Cambodia: Sensitivity Analysis for Key Indicators of External Debt, 2011—31

(In percent)

Projections
20112012201320142015201620212031
Present value of debt-to-GDP ratio
Baseline2020202120201814
A. Alternative scenarios
A1. Key variables at their historical averages in 2011-31 1/201816151413107
A2. New public sector loans on less favorable terms in 2011-31 2/2021222323232321
B. Bound tests
B1. Real GDP growth at historical average minus one standard deviation in 2012-132021212121211915
B2. Export value growth at historical average minus one standard deviation in 2012-13 3/2024303029282415
B3. U.S. dollar GDP deflator at historical average minus one standard deviation in 2012-132021222222211915
B4. Net nondebt creating flows at historical average minus one standard deviation in 2012-13 4/2023252525242115
B5. Combination of B1-B4 using one-half standard deviation shocks2023282827262216
B6. One-time 30 percent nominal depreciation relative to the baseline in 2012 5/2029282929282520
Present value of debt-to-exports ratio
Baseline3940393938373427
A. Alternative scenarios
A1. Key variables at their historical averages in 2011-31 1/3936322926251913
A2. New public sector loans on less favorable terms in 2011-31 2/3941424343434338
B. Bound tests
B1. Real GDP growth at historical average minus one standard deviation in 2012-133940393938373327
B2. Export value growth at historical average minus one standard deviation in 2012-13 3/3951727067645435
B3. U.S. dollar GDP deflator at historical average minus one standard deviation in 2012-133940393938373327
B4. Net nondebt creating flows at historical average minus one standard deviation in 2012-13 4/3945494847453928
B5. Combination of B1-B4 using one-half standard deviation shocks3946565553514330
B6. One-time 30 percent nominal depreciation relative to the baseline in 2012 5/3940393938373327
Present value of debt-to-revenue ratio
Baseline15415114514213713111080
A. Alternative scenarios
A1. Key variables at their historical averages in 2011-31 1/15413511710695886337
A2. New public sector loans on less favorable terms in 2011-31 2/154157155156155152140114
B. Bound tests
B1. Real GDP growth at historical average minus one standard deviation in 2012-1315415415114714213611483
B2. Export value growth at historical average minus one standard deviation in 2012-13 3/15417621920819818714486
B3. U.S. dollar GDP deflator at historical average minus one standard deviation in 2012-1315415715615314714111886
B4. Net nondebt creating flows at historical average minus one standard deviation in 2012-13 4/15417118217516815912782
B5. Combination of B1-B4 using one-half standard deviation shocks15417420019218317313787
B6. One-time 30 percent nominal depreciation relative to the baseline in 2012 5/154212204199193184154112
Debt service-to-exports ratio
Baseline11122222
A. Alternative scenarios
A1. Key variables at their historical averages in 2011-31 1/11111211
A2. New public sector loans on less favorable terms in 2011-31 2/11122223
B. Bound tests
B1. Real GDP growth at historical average minus one standard deviation in 2012-1311122222
B2. Export value growth at historical average minus one standard deviation in 2012-13 3/11222333
B3. U.S. dollar GDP deflator at historical average minus one standard deviation in 2012-1311122222
B4. Net nondebt creating flows at historical average minus one standard deviation in 2012-13 4/11122222
B5. Combination of B1-B4 using one-half standard deviation shocks11222232
B6. One-time 30 percent nominal depreciation relative to the baseline in 2012 5/11122222
Debt service-to-revenue ratio
Baseline55566765
A. Alternative scenarios
A1. Key variables at their historical averages in 2011-31 1/55555643
A2. New public sector loans on less favorable terms in 2011-31 2/55567888
B. Bound tests
B1. Real GDP growth at historical average minus one standard deviation in 2012-1355566765
B2. Export value growth at historical average minus one standard deviation in 2012-13 3/55677896
B3. U.S. dollar GDP deflator at historical average minus one standard deviation in 2012-1355566766
B4. Net nondebt creating flows at historical average minus one standard deviation in 2012-13 4/55667876
B5. Combination of B1-B4 using one-half standard deviation shocks55677886
B6. One-time 30 percent nominal depreciation relative to the baseline in 2012 5/577881087
Memorandum item:
Grant element assumed on residual financing (i.e., financing required above baseline) 6/2525252525252525
Sources: Cambodian authorities; and staff estimates and projections.

Variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), noninterest current account in percent of GDP, and nondebt creating flows.

Assumes that the interest rate on new borrowing is by 2 percentage points higher than in the baseline, while grace and maturity periods are the same as in the baseline.

Exports values are assumed to remain permanently at the lower level, but the current account as a share of GDP is assumed to return to its baseline level after the shock (implicitly assuming an offsetting adjustment in import levels).

Includes official and private transfers and FDI.

Depreciation is defined as percentage decline in dollar/local currency rate, such that it never exceeds 100 percent.

Sources: Cambodian authorities; and staff estimates and projections.

Variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), noninterest current account in percent of GDP, and nondebt creating flows.

Assumes that the interest rate on new borrowing is by 2 percentage points higher than in the baseline, while grace and maturity periods are the same as in the baseline.

Exports values are assumed to remain permanently at the lower level, but the current account as a share of GDP is assumed to return to its baseline level after the shock (implicitly assuming an offsetting adjustment in import levels).

Includes official and private transfers and FDI.

Depreciation is defined as percentage decline in dollar/local currency rate, such that it never exceeds 100 percent.

Table 2a.Cambodia: Public Sector Debt Sustainability Framework, Baseline Scenario, 2008—31

(In percent of GDP, unless otherwise indicated)

ActualProjections
Standard2011-162017-31
200820092010Average 1/Deviation 1/201120122013201420152016Average20212031Average
Public sector debt2/27.829.228.228.728.628.328.628.127.524.518.5
Of which: Foreign-currency denominated27.028.527.628.128.127.928.227.827.224.318.4
Change in public sector debt−2.81.4−1.00.5−0.1−0.30.3−0.5−0.6−0.4−0.9
Identified debt-creating flows−4.84.1−0.60.0−0.1−0.6−0.2−1.0−1.2−0.9−0.2
Primary deficit−0.54.02.31.91.72.42.41.62.01.31.11.81.11.41.0
Revenue and grants16.416.318.016.416.416.817.217.417.618.419.4
Of which: Grants3.34.24.93.33.02.82.72.52.41.91.4
Primary (noninterest) expenditure15.920.220.318.818.918.419.118.718.719.420.8
Automatic debt dynamics−4.30.1−2.9−2.4−2.5−2.2−2.2−2.3−2.3−2.0−1.5
Contribution from interest rate/growth differential−2.40.3−1.7−1.6−1.9−1.8−1.9−2.1−2.1−1.9−1.5
Of which: Contribution from average real interest rate−0.50.30.0−0.1−0.1−0.1−0.1−0.1−0.1−0.1−0.1
Of which: Contribution from real GDP growth−1.90.0−1.6−1.6−1.8−1.7−1.8−2.0−1.9−1.8−1.4
Contribution from real exchange rate depreciation−2.0−0.2−1.3
Other identified debt-creating flows0.00.00.00.00.00.00.00.00.00.00.0
Privatization receipts (negative)0.00.00.00.00.00.00.00.00.00.00.0
Recognition of implicit or contingent liabilities0.00.00.00.00.00.00.00.00.00.00.0
Debt relief (HIPC and other)0.00.00.00.00.00.00.00.00.00.00.0
Other (specify, e.g., bank recapitalization)0.00.00.00.00.00.00.00.00.00.00.0
Residual, including asset changes2.0−2.7−0.30.40.00.30.50.50.50.4−0.7
Other sustainability indicators20.120.720.920.721.020.720.318.314.4
Of which: Foreign-currency denominated19.520.220.420.220.620.319.918.114.3
Of which: External19.520.220.420.220.620.319.918.114.3
Of which: External
Gross financing need 3/1.05.13.53.63.52.73.12.52.52.32.5
PV of public sector debt-to-revenue and grants ratio (in percent)111.6126.7126.9123.5122.3119.3115.299.574.3
PV of public sector debt-to-revenue ratio (in percent)153.7158.3154.8148.6144.9139.8133.5111.280.1
Of which: External 4/149.0154.0151.1145.2142.0137.2131.2110.079.7
Debt service-to-revenue and grants ratio (in percent) 5/4.13.33.93.83.93.94.54.86.05.55.5
Debt service-to-revenue ratio (in percent) 5/5.14.55.34.84.84.75.45.67.06.15.9
Primary deficit that stabilizes the debt-to-GDP ratio2.32.63.22.02.51.91.71.81.71.52.3
Key macroeconomic and fiscal assumptions
Real GDP growth (in percent)6.70.16.08.13.65.86.56.46.87.47.46.77.67.87.7
Average nominal interest rate on forex debt (in percent)0.81.11.11.10.11.11.11.21.31.41.51.31.51.61.5
Average real interest rate on domestic debt (in percent)−10.5−2.1−2.8−4.62.8−3.7−3.5−3.0−2.8−2.7−2.8−3.1−2.4−2.5−2.5
Real exchange rate depreciation (in percent, + indicates depreciation−7.2−0.6−4.7−2.52.8−3.1
Inflation rate (GDP deflator, in percent)12.32.63.14.53.34.13.83.33.23.13.13.42.72.82.8
Growth of real primary spending (deflated by GDP deflator, in percent16.727.36.25.19.5−1.96.93.711.34.97.65.410.98.4
Grant element of new external borrowing (in percent)25.527.530.827.328.728.728.127.022.6
Sources: Cambodian authorities; and staff estimates and projections.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

The public sector debt represents general government gross debt.

Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period.

Revenues excluding grants.

Debt service is defined as the sum of interest and amortization of medium- and long-term debt.

Sources: Cambodian authorities; and staff estimates and projections.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

The public sector debt represents general government gross debt.

Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period.

Revenues excluding grants.

Debt service is defined as the sum of interest and amortization of medium- and long-term debt.

Table 2b.Cambodia: Sensitivity Analysis for Key Indicators of Public Debt, 2011—31

(In percent)

Projections
20112012201320142015201620212031
Present value of debt-to-GDP ratio
Baseline2121212121201814
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages2120202020202220
A2. Primary balance is unchanged from 20112121212223232726
A3. Permanently lower GDP growth 1/2121212222222534
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 2012-132122222323232321
B2. Primary balance is at historical average minus one standard deviations in 2012-132122232423232015
B3. Combination of B1-B2 using one half standard deviation shocks2121222222221915
B4. One-time 30 percent real depreciation in 20122129282726252116
B5. 10 percent of GDP increase in other debt-creating flows in 20122130292928272316
Present value of debt-to-revenue ratio2/
Baseline12712712412211911510074
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages127123119117117116123106
A2. Primary balance is unchanged from 2011127127128129131133148136
A3. Permanently lower GDP growth 1/127128127128128127133174
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 2012-13127130132133132130124109
B2. Primary balance is at historical average minus one standard deviations in 2012-1312713314013813312810878
B3. Combination of B1-B2 using one half standard deviation shocks12712913113012712210579
B4. One-time 30 percent real depreciation in 201212717416515815114311682
B5. 10 percent of GDP increase in other debt-creating flows in 201212718217516916215412585
Debt service-to-revenue ratio2/
Baseline44455655
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages444546811
A2. Primary balance is unchanged from 20114445571115
A3. Permanently lower GDP growth 1/444557818
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 2012-13444567810
B2. Primary balance is at historical average minus one standard deviations in 2012-1344456975
B3. Combination of B1-B2 using one half standard deviation shocks44456865
B4. One-time 30 percent real depreciation in 2012456779910
B5. 10 percent of GDP increase in other debt-creating flows in 201244561415107
Sources: Cambodian authorities; and staff estimates and projections.

Assumes that real GDP growth is at baseline minus one standard deviation divided by the square root of the length of the projection period.

Revenues are defined inclusive of grants.

Sources: Cambodian authorities; and staff estimates and projections.

Assumes that real GDP growth is at baseline minus one standard deviation divided by the square root of the length of the projection period.

Revenues are defined inclusive of grants.

Table 3a.Alternative Scenario of Increasing Borrowing Limits, External Sustainability Framework, 2008—31 1/

(In percent of GDP, unless otherwise indicated)

ActualProjections
HistoricalStandard2011-162017-31
200820092010Average 1/Deviation 1/201120122013201420152016Average20212031Average
External debt (nominal)2/27.028.527.630.034.835.936.237.638.135.219.3
Of which: Public and publicly guaranteed (PPG)27.028.527.630.034.835.936.237.638.135.219.3
Change in external debt−2.41.5−0.92.44.81.10.41.30.5−1.2−1.6
Identified net debt-creating flows−8.0−1.7−4.80.11.50.6−0.1−0.5−1.7−2.1−1.1
Noninterest current account deficit4.33.23.82.41.411.612.211.28.58.07.16.36.36.1
Deficit in balance of goods and services9.28.48.313.612.511.69.18.78.38.47.4
Exports48.543.449.351.551.051.652.553.354.153.953.8
Imports57.751.857.665.163.463.361.762.162.462.361.2
Net current transfers (negative = inflow)−9.3−9.5−8.9−10.00.8−5.9−4.3−4.3−4.4−4.4−4.5−4.1−3.6−4.0
Of which: Official−6.6−6.7−6.8−3.8−2.0−1.8−1.7−1.5−1.4−0.8−0.3
Other current account flows (negative = net inflow)4.44.34.44.04.13.93.83.73.32.02.5
Net FDI (negative = inflow)−7.7−5.0−6.8−4.43.6−10.4−9.3−9.0−6.9−6.6−6.8−6.5−6.3−6.4
Endogenous debt dynamics3/−4.70.1−1.8−1.1−1.5−1.6−1.7−1.9−2.0−2.0−1.2
Contribution from nominal interest rate0.20.30.30.30.30.40.50.50.50.60.3
Contribution from real GDP growth−1.60.0−1.6−1.4−1.8−2.0−2.2−2.4−2.5−2.5−1.5
Contribution from price and exchange rate changes−3.2−0.1−0.6
Residual (3-4)4/5.63.23.92.33.30.50.51.82.20.9−0.5
Of which: Exceptional financing0.0−0.2−0.2−0.1−0.1−0.1−0.1−0.1−0.10.00.0
Present value (PV) of external debt 5/19.621.725.726.727.228.428.927.515.2
PV of external debt (in percent of exports) 5/39.742.250.551.851.753.253.550.928.3
PV of PPG external debt19.621.725.726.727.228.428.927.515.2
In percent of exports39.742.250.551.851.753.253.550.928.3
In percent of government revenues149.7167.4192.6191.9185.2188.7185.9165.481.8
Debt service-to-exports ratio (in percent)1.21.51.41.31.31.61.81.92.32.72.4
PPG debt service-to-exports ratio (in percent)1.21.51.41.31.31.61.81.92.32.72.4
PPG debt service-to-revenue ratio (in percent)4.35.35.35.15.06.06.66.87.98.67.0
Total gross financing need (in billions of U.S. dollars)−0.3−0.1−0.30.20.50.50.40.50.30.41.2
Noninterest current account deficit that stabilizes debt ratio6.71.74.79.27.410.18.26.76.67.57.9
Key macroeconomic assumptions
Real GDP growth (in percent)6.70.16.08.13.65.86.56.46.87.47.46.77.67.87.7
GDP deflator in U.S. dollar terms (change in percent)12.30.52.03.73.87.64.03.12.92.72.83.92.42.52.5
Effective interest rate (percent) 6/0.81.11.11.10.11.21.11.41.51.61.61.41.71.71.7
Growth of exports of G&S (U.S. dollar terms, in percent)7.3−10.022.812.412.618.99.611.211.812.111.912.610.010.610.3
Growth of imports of G&S (U.S. dollar terms, in percent)12.1−9.820.311.610.828.68.09.57.111.111.012.59.510.710.2
Grant element of new public sector borrowing (in percent)23.823.326.526.124.925.325.025.723.025.2
Government revenues (excluding grants, in percent of GDP)13.012.013.113.013.413.914.715.015.616.618.617.3
Aid flows (in billions of U.S. dollars) 7/0.60.70.60.50.60.60.70.70.81.11.8
Of which: Grants0.30.40.60.40.40.50.50.50.60.81.7
Of which: Concessional loans0.20.20.00.10.10.20.20.20.20.20.2
Grant-equivalent financing (in percent of GDP) 8/4.54.84.13.94.13.93.22.12.8
Grant-equivalent financing (in percent of external financing) 8/53.044.155.956.951.252.758.767.460.7
Memorandum items:
Nominal GDP (in billions of U.S. dollars)10.410.411.312.814.215.617.118.920.934.191.5
Nominal dollar GDP growth19.80.68.113.910.89.79.910.410.410.810.210.410.4
PV of PPG external debt (in billions of U.S. dollars)2.32.83.74.24.65.46.09.413.9
(PVt-PVt-1)/GDPt-1 (in percent)4.66.83.53.14.23.64.32.00.51.5
Gross remittances (in billions of U.S. dollars)0.30.30.20.30.30.40.50.50.61.10.9
PV of PPG external debt (in percent of GDP + remittances)19.221.325.226.126.427.628.126.615.1
PV of PPG external debt (in percent of exports + remittances)38.040.548.349.449.250.550.648.027.8
Debt service of PPG external debt (in percent of exports + remittances)1.31.21.21.51.81.82.22.52.4
Sources: Cambodian authorities; and staff estimates and projections.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Includes both public and private sector external debt. The years in the table refer to calendar years.

Derived as [r - g - ρ(1+g)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms.

Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections, also includes contribution from price and exchange rate changes.

Assumes that PV of private sector debt is equivalent to its face value.

Current-year interest payments divided by previous period debt stock.

Defined as grants, concessional loans, and debt relief.

Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).

Sources: Cambodian authorities; and staff estimates and projections.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Includes both public and private sector external debt. The years in the table refer to calendar years.

Derived as [r - g - ρ(1+g)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms.

Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections, also includes contribution from price and exchange rate changes.

Assumes that PV of private sector debt is equivalent to its face value.

Current-year interest payments divided by previous period debt stock.

Defined as grants, concessional loans, and debt relief.

Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).

Table 3b.Alternative Scenario with Increasing Borrowing Limits: Sensitivity Analysis for Key Indicators of External Debt, 2011—31

(In percent)

Projections
20112012201320142015201620212031
Present value of debt-to-GDP ratio
Baseline2226272728292715
A. Alternative scenarios
A1. Key variables at their historical averages in 2011-31 1/222219171615100
A2. New public sector loans on less favorable terms in 2011-31 2/2228293133343523
B. Bound tests
B1. Real GDP growth at historical average minus one standard deviation in 2012-132226282829302816
B2. Export value growth at historical average minus one standard deviation in 2012-13 3/2229373737373316
B3. U.S. dollar GDP deflator at historical average minus one standard deviation in 2012-132227292931313016
B4. Net nondebt creating flows at historical average minus one standard deviation in 2012-13 4/2229323233333016
B5. Combination of B1-B4 using one-half standard deviation shocks2229353536363217
B6. One-time 30 percent nominal depreciation relative to the baseline in 2012 5/2236373840413921
Present value of debt-to-exports ratio
Baseline4251525253545128
A. Alternative scenarios
A1. Key variables at their historical averages in 2011-31 1/424337323028190
A2. New public sector loans on less favorable terms in 2011-31 2/4254575862636543
B. Bound tests
B1. Real GDP growth at historical average minus one standard deviation in 2012-134251525253535128
B2. Export value growth at historical average minus one standard deviation in 2012-13 3/4263888686857537
B3. U.S. dollar GDP deflator at historical average minus one standard deviation in 2012-134251525253535128
B4. Net nondebt creating flows at historical average minus one standard deviation in 2012-13 4/4256626162615629
B5. Combination of B1-B4 using one-half standard deviation shocks4257706969696232
B6. One-time 30 percent nominal depreciation relative to the baseline in 2012 5/4251525253535128
Present value of debt-to-revenue ratio
Baseline16719319218518918616582
A. Alternative scenarios
A1. Key variables at their historical averages in 2011-31 1/16716313811610698610
A2. New public sector loans on less favorable terms in 2011-31 2/167206212209219220212123
B. Bound tests
B1. Real GDP growth at historical average minus one standard deviation in 2012-1316719619919219619317285
B2. Export value growth at historical average minus one standard deviation in 2012-13 3/16721826625124924119988
B3. U.S. dollar GDP deflator at historical average minus one standard deviation in 2012-1316720120619920320017888
B4. Net nondebt creating flows at historical average minus one standard deviation in 2012-13 4/16721322921821921318285
B5. Combination of B1-B4 using one-half standard deviation shocks16721724923623622919489
B6. One-time 30 percent nominal depreciation relative to the baseline in 2012 5/167271269260265261232115
Debt service-to-exports ratio
Baseline11222232
A. Alternative scenarios
A1. Key variables at their historical averages in 2011-31 1/11111211
A2. New public sector loans on less favorable terms in 2011-31 2/11222343
B. Bound tests
B1. Real GDP growth at historical average minus one standard deviation in 2012-1311222232
B2. Export value growth at historical average minus one standard deviation in 2012-13 3/11233343
B3. U.S. dollar GDP deflator at historical average minus one standard deviation in 2012-1311222232
B4. Net nondebt creating flows at historical average minus one standard deviation in 2012-13 4/11222233
B5. Combination of B1-B4 using one-half standard deviation shocks11222343
B6. One-time 30 percent nominal depreciation relative to the baseline in 2012 5/11222232
Debt service-to-revenue ratio
Baseline55677897
A. Alternative scenarios
A1. Key variables at their historical averages in 2011-31 1/55555642
A2. New public sector loans on less favorable terms in 2011-31 2/55688101210
B. Bound tests
B1. Real GDP growth at historical average minus one standard deviation in 2012-1355677897
B2. Export value growth at historical average minus one standard deviation in 2012-13 3/557889128
B3. U.S. dollar GDP deflator at historical average minus one standard deviation in 2012-1355677998
B4. Net nondebt creating flows at historical average minus one standard deviation in 2012-13 4/556779108
B5. Combination of B1-B4 using one-half standard deviation shocks557889118
B6. One-time 30 percent nominal depreciation relative to the baseline in 2012 5/578910111210
Memorandum item:
Grant element assumed on residual financing (i.e., financing required above baseline) 6/2424242424242424
Sources: Cambodian authorities; and staff estimates and projections.

Variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), noninterest current account in percent of GDP, and nondebt creating flows.

Assumes that the interest rate on new borrowing is by 2 percentage points higher than in the baseline, while grace and maturity periods are the same as in the baseline.

Exports values are assumed to remain permanently at the lower level, but the current account as a share of GDP is assumed to return to its baseline level after the shock (implicitly assuming an offsetting adjustment in import levels).

Includes official and private transfers and FDI.

Depreciation is defined as percentage decline in dollar/local currency rate, such that it never exceeds 100 percent.

Applies to all stress scenarios except for A2 (less favorable financing) in which the terms on all new financing are as specified in footnote 2.

Sources: Cambodian authorities; and staff estimates and projections.

Variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), noninterest current account in percent of GDP, and nondebt creating flows.

Assumes that the interest rate on new borrowing is by 2 percentage points higher than in the baseline, while grace and maturity periods are the same as in the baseline.

Exports values are assumed to remain permanently at the lower level, but the current account as a share of GDP is assumed to return to its baseline level after the shock (implicitly assuming an offsetting adjustment in import levels).

Includes official and private transfers and FDI.

Depreciation is defined as percentage decline in dollar/local currency rate, such that it never exceeds 100 percent.

Applies to all stress scenarios except for A2 (less favorable financing) in which the terms on all new financing are as specified in footnote 2.

Table 4a.Alternative Scenario of Increasing Borrowing Limits: Public Sector Debt Sustainability Framework, 2008—31

(In percent of GDP, unless otherwise indicated)

ActualProjections
Standard2011-162017-31
200820092010Average 1/Deviation 1/201120122013201420152016Average20212031Average
Public sector debt2/27.829.228.230.535.336.336.737.938.435.419.4
Of which: Foreign-currency denominated27.028.527.630.034.835.936.237.638.135.219.3
Change in public sector debt−2.81.4−1.02.34.81.00.31.30.5−1.2−1.6
Identified debt-creating flows−4.84.1−0.60.24.91.0−0.11.00.2−0.7−0.6
Primary deficit−0.54.02.31.91.72.67.53.62.73.93.33.92.11.11.7
Revenue and grants16.416.318.016.216.316.817.517.818.319.020.5
Of which: Grants3.34.24.93.33.02.92.92.82.72.41.8
Primary (noninterest) expenditure15.920.220.318.823.820.420.221.721.621.121.5
Automatic debt dynamics−4.30.1−2.9−2.4−2.6−2.6−2.8−2.9−3.0−2.8−1.7
Contribution from interest rate/growth differential−2.40.3−1.7−1.6−2.0−2.2−2.4−2.6−2.8−2.7−1.6
Of which: Contribution from average real interest rate−0.50.30.00.0−0.1−0.1−0.1−0.1−0.1−0.1−0.1
Of which: Contribution from real GDP growth−1.90.0−1.6−1.6−1.9−2.1−2.3−2.5−2.6−2.6−1.5
Contribution from real exchange rate depreciation−2.0−0.2−1.3
Other identified debt-creating flows0.00.00.00.00.00.00.00.00.00.00.0
Privatization receipts (negative)0.00.00.00.00.00.00.00.00.00.00.0
Recognition of implicit or contingent liabilities0.00.00.00.00.00.00.00.00.00.00.0
Debt relief (HIPC and other)0.00.00.00.00.00.00.00.00.00.00.0
Other (specify, e.g., bank recapitalization)0.00.00.00.00.00.00.00.00.00.00.0
Residual, including asset changes2.0−2.7−0.32.1−0.10.10.40.30.2−0.5−1.0
Other sustainability indicators20.222.326.227.227.628.829.327.715.3
Of which: Foreign-currency denominated19.621.725.726.727.228.428.927.515.2
Of which: External19.621.725.726.727.228.428.927.515.2
Of which: External
Gross financing need 3/1.05.13.53.78.74.84.05.24.83.62.4
PV of public sector debt-to-revenue and grants ratio (in percent)112.1137.2160.8161.4157.4161.3160.2145.674.9
PV of public sector debt-to-revenue ratio (in percent)154.4171.7196.4195.2188.1191.2188.1166.782.2
Of which: External 4/149.7167.4192.6191.9185.2188.7185.9165.481.8
Debt service-to-revenue and grants ratio (in percent) 5/4.13.33.93.84.64.65.05.36.47.06.1
Debt service-to-revenue ratio (in percent) 5/5.14.55.34.85.65.66.06.37.58.06.7
Primary deficit that stabilizes the debt-to-GDP ratio2.32.63.20.22.82.62.42.62.83.32.7
Key macroeconomic and fiscal assumptions
Real GDP growth (in percent)6.70.16.08.13.65.86.56.46.87.47.46.77.67.87.7
Average nominal interest rate on forex debt (in percent)0.81.11.11.10.11.21.11.41.51.61.61.41.71.71.7
Average real interest rate on domestic debt (in percent)−10.5−2.1−2.8−4.62.8−3.7−3.5−3.0−2.8−2.7−2.8−3.1−2.4−2.5−2.5
Real exchange rate depreciation (in percent, + indicates depreciation−7.2−0.6−4.7−2.52.8−3.1
Inflation rate (GDP deflator, in percent)12.32.63.14.53.34.13.83.33.23.13.13.42.72.82.8
Growth of real primary spending (deflated by GDP deflator, in percent16.727.36.25.19.5−1.935.1−8.85.815.36.58.78.88.3
Grant element of new external borrowing (in percent)23.823.326.526.124.925.325.025.723.0
Sources: Cambodian authorities; and staff estimates and projections.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

The public sector debt represents general government gross debt.

Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period.

Revenues excluding grants.

Debt service is defined as the sum of interest and amortization of medium- and long-term debt.

Sources: Cambodian authorities; and staff estimates and projections.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

The public sector debt represents general government gross debt.

Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period.

Revenues excluding grants.

Debt service is defined as the sum of interest and amortization of medium- and long-term debt.

Table 4b.Alternative Scenario of Increasing Borrowing Limits: Sensitivity Analysis for Key Indicators of Public Debt, 2011—31

(In percent)

Projections
20112012201320142015201620212031
Present value of debt-to-GDP ratio
Baseline2226272829292815
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages2221202020201916
A2. Primary balance is unchanged from 20112222222223232422
A3. Permanently lower GDP growth 1/2227282931323536
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 2012-132227293032323322
B2. Primary balance is at historical average minus one standard deviations in 2012-132223242426272615
B3. Combination of B1-B2 using one half standard deviation shocks2222222325262515
B4. One-time 30 percent real depreciation in 20122234343434343118
B5. 10 percent of GDP increase in other debt-creating flows in 20122235363636363217
Present value of debt-to-revenue ratio2/
Baseline13716116115716116014675
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages13712812111511210810077
A2. Primary balance is unchanged from 2011137133130128128127127110
A3. Permanently lower GDP growth 1/137162165163171173181172
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 2012-13137165171169176177171109
B2. Primary balance is at historical average minus one standard deviations in 2012-1313713914113914514513671
B3. Combination of B1-B2 using one half standard deviation shocks13713513313213814013473
B4. One-time 30 percent real depreciation in 201213720920319319218716286
B5. 10 percent of GDP increase in other debt-creating flows in 201213721621220420319817085
Debt service-to-revenue ratio2/
Baseline45555676
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages44440106
A2. Primary balance is unchanged from 2011444512311
A3. Permanently lower GDP growth 1/4456681120
B. Bound tests
B1. Real GDP growth is at historical average minus one standard deviations in 2012-134456681112
B2. Primary balance is at historical average minus one standard deviations in 2012-1344552466
B3. Combination of B1-B2 using one half standard deviation shocks44451266
B4. One-time 30 percent real depreciation in 201245788101314
B5. 10 percent of GDP increase in other debt-creating flows in 201244671515139
Sources: Cambodian authorities; and staff estimates and projections.

Assumes that real GDP growth is at baseline minus one standard deviation divided by the square root of the length of the projection period.

Revenues are defined inclusive of grants.

Sources: Cambodian authorities; and staff estimates and projections.

Assumes that real GDP growth is at baseline minus one standard deviation divided by the square root of the length of the projection period.

Revenues are defined inclusive of grants.

1This DSA has been prepared jointly by IMF and World Bank staffs and in consultation with the Asian Development Bank (AsDB), using the debt sustainability framework for low-income countries approved by the Boards of both institutions.
2The low-income country debt sustainability framework (LIC DSF) recognizes that better policies and institutions allow countries to manage higher levels of debt, and thus the threshold levels are policy-dependent. Cambodia’s policies and institutions, as measured by the World Bank’s CPIA, place it as a “medium performer,” reflecting the 2010 CPIA upgrade. The relevant indicative thresholds for this category are: 40 percent for the NPV of debt-to-GDP ratio, 150 percent for the NPV of debt-to-exports ratio, 250 percent for the NPV of debt-to-revenue ratio, 20 percent for the debt service-to-exports ratio, and 30 percent for the debt service-to-revenue ratio. These thresholds are applicable to public and publicly guaranteed external debt.
3Based on a borrowing scenario in the authorities’ preliminary debt strategy, which is yet to be finalized and, therefore, is not in the 2012 budget, adopted in December 2011.
4Another 20 percent at 1 percent interest rate with a grace period and maturity of 12 and 40 years; the remaining loans are assumed to be from multilateral agencies.
5Based on the pace of financial deepening (e.g., credit-to-GDP ratio) during the last decade, over the DSA projection period, Cambodia’s credit-to-GDP is expected to reach or exceed that of the median emerging market (EM) economy (Rishi et al., 2010). Empirical studies show that the median direct fiscal cost of banking crises in EMs is 11.5 percent of GDP (Laeven and Valencia, 2010).

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