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Cambodia: Staff Report for the 2013 Article IV Consultation—Informational Annex

Author(s):
International Monetary Fund. Asia and Pacific Dept
Published Date:
February 2014
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Fund Relations

(As of November 30, 2013)

Membership Status

Joined December 31, 1969; accepted the obligations under Article VIII, Sections 2, 3, and 4 on January 1, 2002.

General Resources Account:

SDR MillionPercent Quota
Quota87.50100.00
Fund holdings of currency (Exchange Rate)87.50100.00
Reserve Tranche Position0.000.00

SDR Department:

SDR MillionPercent Allocation
Net cumulative allocation83.92100.00
Holdings68.3681.46

Outstanding Purchases and Loans: None

Latest Financial Arrangements:

TypeDate of ArrangementExpiration DateAmount Approved (SDR Million)Amount Drawn (SDR Million)
ECF 1/Oct. 22, 1999Mar. 05, 200358.5058.50
ECF 1/May 06, 1994Aug. 31, 199784.0042.00

Formerly PRGF

Formerly PRGF

Projected Payments to the Fund 2/

(SDR Million; based on existing use of resources and present holdings of SDRs):

Forthcoming
20132014201520162017
Principal Charges/Interest0.000.020.020.020.02
Total0.000.020.020.020.02

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

Multilateral Debt Relief Initiative

As part of the Multilateral Debt Relief Initiative (MDRI), the IMF Executive Board on January 5, 2006 approved relief on 100 percent of debt incurred by Cambodia to the IMF before January 1, 2005. This resulted in the forgiving of all of Cambodia’s outstanding debt to the IMF, a total of SDR 56.8 million (about US$82 million). The authorities intend to spend the resources over a number of years, initially on rural irrigation projects. The National Bank of Cambodia (NBC) transferred the full MDRI proceeds to the Ministry of Economy and Finance effective March 2006.

Safeguards Assessment

A voluntary safeguards assessment of the NBC was completed in January 2010 at the request of the authorities, which updated the previous March 2004 voluntary assessment. The update assessment found that the NBC had taken steps to strengthen aspects of its safeguards framework; however, important recommendations proposed in 2004 were still outstanding, and some new risks had emerged in the area of external audit.

Exchange Rate Arrangement and Payments System

Cambodia’s exchange regime is classified as other managed. The de jure regime is a managed float. The official exchange rate, which is expressed in riels per U.S. dollar, applies to all official external transactions conducted by the central government and state enterprises, and is used for accounting purposes by the NBC. It is determined by the foreign exchange market, with the official rate adjusted to be within 1 percent of the market rate on a daily basis.

Cambodia accepted the obligations of Article VIII, Sections 2, 3, and 4 on January 1, 2002. Cambodia maintains an exchange system that is free of restrictions on the making of payments and transfers for current international transactions.

Article IV Consultation

Cambodia is on the standard 12-month Article IV consultation cycle. The last Article IV consultation discussions were held in Phnom Penh during September 25-October 5, 2012. The Executive Board approved the staff report on December 3, 2012.

Financial Sector Assessment Program (FSAP)

The joint IMF-World Bank FSAP mission took place in March 2010 and the assessment was completed in October 2010.

Technical Assistance

Technical assistance is currently focused on bank supervision, monetary operations, public financial management, tax and customs administration, tax policies, macro-fiscal and revenue forecasting, financial sector supervision, and macro-financial statistics. Delivery is through a resident advisor at the NBC, peripatetic experts, and short-term visits from headquarters.

Resident Representative

The IMF Resident Representative in Phnom Penh (Mr. Faisal Ahmed) was appointed in July 2011. From July 2010 to June 2011, the IMF’s Resident Representative for Indonesia (Mr. Milan Zavadjil) also assumed the responsibilities for the IMF office in Cambodia.

IMF-World Bank Collaboration

(October 2013)

The Bank and the IMF country teams for Cambodia, led by Mr. Mathew Verghis (Sector Manager, EASPR) and Ms. Meral Karasulu (IMF Mission Chief for Cambodia), maintain a close working relationship and have an active dialogue on a range of macroeconomic and structural issues.

Recent key areas of cooperation and coordination include:

  • Macroeconomic policy advice to the authorities. The IMF and the World Bank staffs have consulted each other on key macroeconomic policy messages to the authorities to avoid sending conflicting messages. Bank staff share and discuss the review of macroeconomic developments and country pages. IMF staff share policy notes and analytical background notes related to Article IV consultation missions.
  • Financial sector reform and FSAP. The World Bank and the IMF teams have worked closely together while undertaking the 2010 FSAP. In line with the FSAP recommendations, technical assistance missions are now ongoing and close coordination between the IMF and the World Bank continues.
  • Public financial management and tax and customs administration reform. Both institutions are working to strengthen coordination of work on public financial management including tax and customs administration reform. Both teams share as much as possible the work done in this area. Both teams also worked closely together on customs modernization and reform.
  • Article IV consultations. IMF Article IV consultations regularly share their macroeconomic data with the World Bank and hold working sessions to try and reconcile macroeconomic data sets. The collaboration is closest on the debt sustainability analysis, a joint product, but extends more broadly into other areas of the consultation as well. World Bank staff are also invited to and do participate in some of the key meetings. The IMF also participated in some of the WB TA missions on contingent liabilities. Both institutions are considering using the TA mission findings to further strengthen the DSA analysis.
  • Structural reforms. The IMF staff and the World Bank teams have worked together to share views on a range of other issues, including structural reforms for improving investment climate, economic diversification, customs modernization, and rural development.

Based on the above partnership, the World Bank and the IMF share a common view about Cambodia’s macroeconomic and structural reform priorities. These include:

  • Sustaining growth. Economic activity remains strong despite some moderation in recent months and the outlook remains broadly positive but is subject to some downside risks, including prolonged political stalemate. Sustaining growth would require appropriate fiscal consolidation and prudent management of the banking sector risks. Improving the business climate, reducing infrastructure and skills bottlenecks, promoting private sector development and economic diversification, improving governance and the delivery of public services and supporting rural development continue to be essential to promote self-sustaining and inclusive growth.
  • Managing public finances and debt. Fiscal policy remains the main instrument for macroeconomic management given high dollarization. Prudent fiscal management is, therefore, critical and needs to be underpinned by improved revenue collection, prioritized spending, and better monitoring of contingent liabilities, including through the budgetary and public debt management framework and further progress in budgetary transparency.
  • Safeguarding financial system stability and improving the effectiveness of monetary policy. Implementing the key recommendations of the 2010 FSAP remains critical to safeguarding financial stability. These include implementing a moratorium on new bank licenses, strengthening coordinated supervision, developing the foreign exchange market, and improving the supervisory capacity. Financial stability risks from the buoyant real estate markets need to be managed through strengthened supervision and improved data collection. Developing an interbank market remains a necessary step for a transition to more effective and market based monetary policy operations.
  • Improving governance. Both the World Bank and IMF have stressed the critical role of governance in improving the quality of service delivery and fostering private sector development, which is the engine of growth.

The teams are committed to continue the close cooperation going forward. The table below details the specific activities planned by the two country teams over the next 12-month period along with their expected deliveries.

Cambodia: Joint Managerial Action Plan, 2013–14
TitleProductsProvisional and Actual Timing of MissionsExpected and Actual

Delivery Date
A. Mutual Information on Relevant Work Programs
The World Bank’s Work program in the next 12 MonthsMacroeconomic monitoring

  • Semi-annual updates
  • Cambodia Economic update
OngoingOnce every six months: tentatively in April and Oct 2014
Financial sector
  • FSAP follow-up technical assistance to improve accounting and auditing practices for financial institutions. FSAP follow-up technical assistance on crisis preparedness and crisis management framework.
  • FSAP follow-up technical assistance on regulatory framework.
OngoingTwo or three missions a year.
Public sector management
  • Public Financial Management Reform Program (PFMRP)envisioned.
  • Public administration reform (PAR) potential support
OngoingPFMAP closes in Nov 2013 New PFMMP to be established before the end of 2013
Trade
  • Trade Development Support Program
  • Connectivity
  • Customs modernization and reform
On going
The IMF’s Work Program in the next 12 MonthsMacroeconomic policy analysis and advice
  • 2014 Article IV consultation
  • Policy notes on request
3rd Quarter 2014 OngoingDecember 2014
Technical assistanceOngoing
  • Fiscal sector: Cash management, government accounting, budget classification, tax policy, tax administration, macro-fiscal capacity building, PFM regional advisor and advisor to the National Treasury
  • Financial sector: FSAP follow-up work, resident banking supervision advisor, consolidated supervision, foreign exchange market, liquidity management, data improvement
  • Statistics: National accounts, price, balance of payments
B. Agreement on Joint Products and Missiosns
Joint Products in the next 12 Months
  • Debt sustainability analysis
2014 Article IV

consultations
During Article IV

consultations

Relations with the Asian Development Bank

(October 2013)

From 1992 through September 2013, the Asian Development Bank (AsDB) approved funding of US$1,827.97 million including 70 loan projects and programs of US$1,572.26 million with low interest, and 21 Asian Development Fund (ADF) grants of US$255.71 million to Cambodia for structural reform programs and development projects. To date, 46 loan projects for a total of US$964.94 million and 10 ADF grants of US$85.51 million have been completed.

The sector composition of the active loan/grant portfolio of US$ 819.92 as of September 2013 is: (i) agriculture and natural resources, US$245.5 million; (ii) education, US$81.6 million; (iii) energy, US$65.0 million; (iv) finance, US$15.0; (v) health, nutrition, and social protection, US$10.0 million; (vi) industry and trade, US$11.0 million; (vii) multi-sector (flood reconstruction), US$55.0 million; (viii) public sector management, US$78.56 million; (ix) transport and communication, US$200.26 million; and (x) water supply, sanitation, and waste management, US$28.0 million.

ADB Cambodia Country Partnership Strategy (CPS), 2011–2013, endorsed by the Board on 5 July 2011, supports the Government’s development priorities and is aligned closely with the core operational areas and drivers of change of ADB’s Strategy 2020. It aims to reduce poverty through projects and programs to promote inclusive economic growth and social development and equity. The CPS continues a geographical focus on the Tonle Sap Basin, one of the poorest, most environmentally sensitive regions of Cambodia, and strengthens integration of Cambodia into the Greater Mekong Subregion (GMS).

The 2011–2013 CPS focuses on five priority sectors―transport (rural and provincial roads), water supply, sanitation and urban development, agriculture and natural resources (agriculture commercialization and irrigation support), education (lower secondary schools and vocational training), and finance (banking regulation, SME finance, and microfinance), supported by ongoing activities in public sector management (public financial management, and deconcentration and decentralization). The program responds to the country challenges of climate change, decentralization, rural-urban linkages, and regional cooperation. The program also incorporates five key cross-cutting themes into all activities—private sector development, governance, gender equity, knowledge solutions, and partnerships.

The 3-year time period for the CPS was determined jointly with the Government to align with Cambodia’s strategic planning cycle, and has been characterized by Government officials as of great importance for the evolution of the Cambodian economy. Given this development context and the relatively short three-year planning horizon, the CPS implements a realistic, focused and aligned strategy, consistent with emerging government priorities. The CPS supports the Government with the preparation of the National Strategic Development Plan 2014–2018 through analytical sector and thematic support. This work will also support the preparation of the CPS 2014–2018, for Board endorsement in June 2014.

In finance, the AsDB will continue its leading role in the financial sector to: (i) consolidate the banking sector reforms achieved to date, improve financial infrastructure including the national clearing system and the credit information center covering both banks and microfinance institutions, and support the strengthening of supervision capacity of the National Bank of Cambodia including AML/CFT measures; (ii) expand the insurance business for life insurance; and (iii) facilitate capital market development for more efficient domestic resource mobilization. The AsDB supports implementation of the Financial Sector Development Strategy (2011–2020). The CPS also includes support for government measures to deepen public sector management reform and strengthen anticorruption measures. For decentralization, the AsDB is supporting policy and capacity development in the transfer of functions to sub-national administrations, fiscal decentralization (including public financial management capacity development), and sub-national financing mechanisms such as the Sub-National Investment Facility. Regarding public financial management, AsDB has supported budget preparation and execution, financial management, internal control, procurement, and M&E to improve accountability in public expenditures for selected ministries1 as well as the public debt management capacity of MEF. AsDB has also supported the external audit capacity of the National Audit Authority.

In private sector development, the AsDB has assisted the government’s efforts in: (i) promoting competition in domestic markets through competition policy and law, and regulatory efficiency through capacity development to institutionalize regulatory impact assessment system in the government; (ii) supporting trade policy reforms such as through strengthening of institutional and regulatory framework for effective food safety management systems, and capacity and awareness of the systems; and (iii) enhancing the environment for public-private partnership and stimulating PPP opportunities. Assistance has also been provided to help the government improve its competitiveness at the GMS level through reducing border-related costs and distortions; improving physical infrastructure; enhancing transport and trade facilitation, including promoting compliance with SPS standards. Later interventions would be more focused on improving the trade facilitation and logistical links to the sub-region as systems and procedures become more developed and integrated.

Asian Development Bank: Loan/Grant Commitments and Disbursements to Cambodia, 1992–2013(In millions of U.S. dollars, as of September 30, 2013)
Loan/Grant

Approvals
Contract Awards/

Commitment
Disbursements
1199267.70.00.0
219930.04.45.4
3199428.235.912.2
4199545.128.135.9
51996105.015.332.1
619970.041.510.7
7199840.029.129.3
8199988.017.026.2
92000109.6114.450.8
10200175.240.748.3
112002116.564.478.9
12200398.361.973.3
13200465.062.476.7
142005152.096.484.5
152006269.844.755.8
162007364.185.862.1
172008484.1128.3138.9
1820095144.562.384.6
1920106160.866.073.5
202011770.0143.8128.6
212012 8316.91142.594.5
222013 9111.5144.3136.5
TOTAL:1,912.31,429.21,343.6

US$10 million loans and US$42 million grants approved in 2005.

US$62 million loans and US$7.8 million grants approved in 2006.

US$27.1 million loans and US$37 million grants approved in 2007.

US$53.8 million loans and US$30.3 million grants approved in 2008.

US$71.7 million loans and US$72.8 million grants approved in 2009.

US$95.0 million loans and US$65.8 million grants approved in 2010.

US$67.0 million loans and US$3.0 million grants approved in 2011.

US$275.46 million loans and US$41.45 million grants approved in 2012.

US$70 million loans and $25.21 million loans approved in 2013. As of 30 September 2013, actual contract awards and disbursements are $111.81 and 136.49 million respectively.

US$10 million loans and US$42 million grants approved in 2005.

US$62 million loans and US$7.8 million grants approved in 2006.

US$27.1 million loans and US$37 million grants approved in 2007.

US$53.8 million loans and US$30.3 million grants approved in 2008.

US$71.7 million loans and US$72.8 million grants approved in 2009.

US$95.0 million loans and US$65.8 million grants approved in 2010.

US$67.0 million loans and US$3.0 million grants approved in 2011.

US$275.46 million loans and US$41.45 million grants approved in 2012.

US$70 million loans and $25.21 million loans approved in 2013. As of 30 September 2013, actual contract awards and disbursements are $111.81 and 136.49 million respectively.

Statistical Issues

(November 2013)

Assessment of Data Adequacy for Surveillance

General. Data provision is broadly adequate for surveillance. Extensive technical assistance (TA) has been provided by the IMF, United Nations Development Programme, Asian Development Bank (AsDB), and World Bank, as well as by bilateral partners, leading to substantial capacity improvements. Currently, Cambodia is participating in Statistics Department’s (STA’s) project on the Implementation of the System of National Accounts and International Comparison Program, funded by the government of Japan. This project will provide TA to build statistical capacity and improve both national accounts and price statistics. Despite the progress made in improving data statistics, several shortcomings continue to hamper timely and comprehensive analysis.

National accounts. Despite improvements in recent years, weaknesses remain in the quality and timeliness of national accounts data. The GDP estimates remain hampered by the lack of comprehensive and reliable source data, in part due to resource constraints and weak data collection techniques. Statistics Sweden has been assisting the National Institute of Statistics (NIS) for improving basic statistics for national accounts compilation. A TA mission that visited Cambodia in November 2011 assessed the methodologies used to compile national accounts and noted inconsistencies in GDP estimates in current and constant prices, mainly for the period 2007–2010, and provided guidance for revising the GDP series. The November 2011 mission also provided support in developing the quarterly national accounts estimates. A mission to assess the progress in implementing past TA recommendations is scheduled for February 2014.

Price statistics. The compilation of the consumer price index (CPI) suffers from insufficient coverage. An updated CPI series was introduced starting in April 2012. Geographic coverage of the series has been expanded to include Phnom Penh plus five provinces. Statistics Sweden continues to provide assistance with the household budget survey and the CPI, but the project with Sweden is expected to end in December 2013. An STA TA mission visited Phnom Penh in April 2012 to assist with improving the CPI. The authorities indicated a need for assistance with developing a producer price index (PPI), but no funds have been allocated to support the compilation of PPI.

Government finance statistics (GFS). The Ministry of Finance and Economy began implementing reforms to the government accounting system and budgetary nomenclature in 2007, based on the Government Finance Statistics Manual (GFSM) 2001, with the assistance of the IMF. In addition, several STA missions have assisted with GFS compilation procedures within the GSFM 2001 framework. In 2011, Cambodia agreed to participate in the GFS project funded by the Government of Japan. As a result, the authorities have benefited from two TA missions in 2012 and 2013 to assist them in the compilation and implementation of GFS. The later has also worked on establishing a bridge between the government’s new chart of accounts (COA, approved by the authorities in February 2013 and the GSFM 2001 classifications so that accounting records can be used as source data in compiling GFS, with the objective of including the GFS in the new Financial Management Integration System (FMIS). However, the coverage is limited and focusing on the operations of the budget only, and is not fully integrating activities related to disbursement of external loans and grants.

Monetary and financial statistics. The NBC compiles the balance sheet and survey for the central bank and other depository institutions in accordance with the IMF’s Monetary and Financial Statistics Manual. Since August 2005, the NBC has reported monthly monetary and financial statistics to STA using the Standardized Report Forms. The NBC received TA during the FSAP on the compilation of financial soundness indicators (FSIs). The NBC now compiles monthly core FSIs and shares them with IMF staff regularly.

External sector statistics. Cambodia is part of the Asian module of the Project on the Improvement of External Sector Statistics (ESS) in the Asia Pacific Region (funded by the government of Japan launched in October 2012), which aims to improve the accuracy, availability, comparability, and timeliness of ESS in the region. The project consists mainly of short-term TA missions in three years. The first TA mission to Cambodia in April 2013 prepared the foundation to improve and update the ESS compilation methodology and techniques for implementing the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6). The NBC has made progress in improving the compilation system following the 2012 balance of payments TA mission. The most significant accomplishments include: (i) implementing an updated International Transactions Reporting System (ITRS) coding list aligned with BPM6 requirements; (ii) reducing the reporting threshold to US$ 5,000 within the ITRS to improve coverage; and (iii) developing a preliminary questionnaire for the direct investment (DI) survey. However, further actions are needed in the following areas: (i) improvement of cooperation and data-sharing between government agencies, (ii) establishing survey on FDI positions and recording flows, including FDI inflows related to hydropower projects and off-shore oil exploration; (iii) improvement of compilation techniques of trade and external debt data; (iii) better data dissemination on NBC’s website. The second TA mission in November 2013 reviews progress in the implementation of the action plan agreed during the April 2013 TA mission; and focus on the trial run of the FDI survey, the improvement of data collection and compilation of goods for processing, travel, transportation and technical assistance, and further improvement of the ITRS. Additionally, the mission assesses the consistency between ESS and monetary and financial statistics.

Data Standards and Quality

Cambodia participates in the IMF’s General Data Dissemination System. No data ROSC are available.

Cambodia: Table of Common Indicators Required for Surveillance(As of December 2013)
Date of latest ObservationDate ReceivedFrequency of Data1Frequency of Reporting1Frequency of Publication1
Exchange Rates12/20/ 201312/22/ 2013DDW
International Reserve Assets and Reserve Liabilities of the Monetary Authorities212/ 201312/2013BiweeklyBiweekly, 4 week lagN/A
Reserve/Base Money10/201311/2013MM, 4–6 week delayM
Broad Money10/201311/2013MM, 4–6 week delayM
Central Bank Balance Sheet10/201311/2013MM, 4–6 week delayM
Consolidated Balance Sheet of the Banking System10/201311/2013MM, 4–6 week delayM
Interest Rates310/201312/2013MM, 4–6 week lagM
Consumer Price Index10/201311/2013MM, 2–4 week lagM
Revenue, Expenditure, Balance and Composition of Financing4—General Government58/201311/2013MM, 4–6 week lagM
Revenue, Expenditure, Balance and Composition of Financing4—Central Government8/201311/2013MM, 4–6 week lagM
Stocks of Central Government and Central Government-Guaranteed Debt69/201311/2013MM, 3 month lagM
External Current Account Balance6/20139/2013QQ, 3 month lagQ
Exports and Imports of Goods and Services10/201312/2013MM, 4–6 week lagM
GDP/GNP20125/2013AA, 6 month lagA
Gross External Debt9/201311/2013MM, 3 month lagM
International Investment Position706/20139/2013QQ, 3 month lagQ

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I), and Not Available (N/A).

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I), and Not Available (N/A).

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Main Websites of Data

National Bank of Cambodia (www.nbc.org.kh)

Exchange rates

Balance of payments

Interest rates

Monetary survey

Credit granted by deposit money banks and nonbank financial institutions

Ministry of Economic and Finance (www.mef.gov.kh)

Government budget

Fiscal revenue, expenditure, and financing

National Institute of Statistics (www.nis.gov.kh)

Consumer Price Index

National accounts

Population census

Labor force survey

Socioeconomic survey

Household survey

1Ministry of Agriculture, Forestry and Fisheries; Ministry of Rural Development; and Ministry of Water Resources and Meteorology.

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