Budget 2025 allows for up to $2 billion in SDRs

A leading economist said Cambodia’s debt management is expected to remain strong as the current draft finance law for fiscal management in 2025 will allow the government to borrow up to $2 billion in Special Drawing Rights (SDR). In 2024, the government budget allowed borrowing of SDR 1.7 billion.

An international reserve asset created by the International Monetary Fund (IMF), the SDR is a form of IMF reserve that can be converted into cash on demand to supplement the official reserves of member countries.

Article 2 of Chapter 2 of the draft Finance Law for Budgetary Management in 2025, which was approved by the Council of Ministers at the plenary meeting on October 25, states: “For fiscal management in 2025, the government is allowed to borrow up to 2,000,000,000 in SDR (2 billion SDR ). Any borrowings from foreign lenders, as defined in this agreement, shall be treated as concessional loans to be repaid at favorable interest rates.

The bill also states that the Minister of Economy and Finance, under the leadership of the Prime Minister, will have the exclusive right to sign agreements to borrow from foreign lenders for public investment projects and budget support based on the overall budget of the country or government. guarantees.

A report on any loans or guarantees must be submitted to the National Assembly (NA) and the Senate every six months.

In a statement on November 20, the National Assembly said that the Budget Management Bill will be discussed at the third session of the government of the seventh legislative assembly on November 27.

Hong Vanak, an economist at the Royal Academy of Cambodia, spoke about this. Message 21 November Cambodia, as a developing country, clearly needs substantial funding for investment in infrastructure development – including roads, railways, bridges, airports and ports – to create an attractive environment for foreign investment and contribute to the country’s rapid economic growth. He added that all loans previously received by the government were used as requested and were very effective.

“In the past, the government saw opportunities to accelerate the country’s development by attracting low-interest loans from international financial institutions, including partner countries. Most of these loans were used for public investment projects to help Cambodia catch up with other countries in the region and the rest of the world, as Cambodia had lost several decades resolving its internal crises,” he said.

Financial institutions that have provided loans to Cambodia include the World Bank (WB), International Monetary Fund (IMF), Asian Development Bank (ADB) and Asian Infrastructure Investment Bank (AIIB), Vann said.

Regarding the possibility of repayment of debt to creditors, he explained: “Creditors usually conduct a thorough investigation of the solvency of the borrowing country or institution before agreeing to provide loans. Cambodia has always had a good history of repaying debts.”

“As a developing country, Cambodia regularly receives concessional or low-interest loans,” he added.

According to previous reports, the Kingdom’s current debt amounts to more than 30% of its gross domestic product (GDP).

The borrowing limit for 2024 of SDR 1.7 billion remained unchanged from the 2023 figure.

According to the 2024 Budget Law, borrowing decisions are based on five key factors: 1) the need for public investment, especially in infrastructure, to stimulate economic recovery and growth, 2) development programs and projects for which concessional lending agreements will be signed . 2024, especially public investment projects in priority sectors such as infrastructure and productivity improvements, 3) concessional loans, 4) Cambodia’s public debt situation, which is stable with low risk, and 5) further improvement in project management and implementation.