Budget bonanza

Sok Chan

Emphasis based on infrastructure, human resources development and good governance

This year’s national budget is designed to stimulate economic demand through expenditure, responding to internal and external shocks and a general economic slowdown.

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Key elements are infrastructure, the development of human resources and good governance.

The budget law 2020 is prepared based on “Nine approaches and principles”, said Hav Ratanak, director-general of the budget at the Ministry of Economy and Finance.

He said that this year’s budget law is to align with the macro-economic framework, ensure  stability and income collection, making sure that revenue collection is properly managed and efficient, engaging revenue collection with state property management and performance with budget allocation.


Moreover, it will determine priority expenditure to increase the efficiency of the budget, with appropriate and “wise” spending, focusing on human resources development, re-skilling or upskilling, determining the exact price of each programme and activity, transferring the money to each institution to implement in order to build a sense of responsibility, maintain a balanced and stable budget stability and strengthen public debt management.

“The Budget law 2020 is prepared based on the stimulus budget policy, focusing on human resources, the reform of infrastructure and good governance, said Hav.

“It is called a strategic budget for building power to prevent challenges both internal and external through the strengthening of internal capabilities, pushing deep and sharp reform, ensuring peace, stability and sustainable economic growth, referencing the promotion of the well-being of the people towards the vision for 2030 and 2050.”

The 2020 national budget cost will increase by 28 percent – around $8.33 billion of gross domestic product (GDP). The Kingdom’s GDP is around $29.36 billion. In 2019, the budget expense was only 25 percent of GDP – $6.79 billion.

This year, the current expense is 16.65 percent of GDP – $4.95 billion – compared with 16.49 percent in 2019 – around $4.47 billion.

The current expenses are allocating about $587.6 million to general administration, $1.165billion on national defence, security and social order, $1.686 billion on social affairs and $389.2 billion on the economy.

On the other hand, capital expense will increase 11.36 percent to around $3.38 billion of  GDP, compared with 8.53 percent – about $2.31billion – in 2019. That is broken down into  $1.59 billion on public credit investment locally, $1.51billion on public investment loans outside the country and $276million to debt service payment.

This year, the budget law is set to increase national revenue to around 22.13 percent of GDP, around $6.58 billion.

Speaking at the Macroeconomic Management and Budget Law 2020, Vongsey Vissoth, secretary of state of the Ministry of Economy and Finance, said that the national budget 2020 is a significant instrument to serve development policies, to contribute to economic growth and to distribute national resources from growth to serve the people, boosting the living standards of people and solving social inequity and other issues, such as environmental problems.

“The national budget in 2020 is set to counter uncertainty in the global economy and to continue implementing government policy efficiently and sustainably,” Vongsey said.

He added the government is reserving 3 percent of the total budget expense or the stimulus package to support the growth of the economy.

The stimulus budget package will focus on the infrastructure, economic competitiveness and diversification (logistics, transport, skills, electricity and public services), creating jobs in both urban and rural areas and develop ing human resources (up-skilling and reskilling).

Vongsey added that the Kingdom’s GDP is forecast to grow at 6.1 percent in 2020 (although the World Bank estimate is 7.1 percent).

Builders at work in Sihanoukville. AFP

He said events of the last two months in the global economy will affect the Kingdom’s economy in 2020 and the country faces challenges.

“The slowdown of the global economy, geo-politics, the Middle East, climate change, Wuhan’s Coronavirus in China – it affects the tourism sector. When the tourism sector slows down, it brings the other sectors down such as logistics, accommodation, food, as well as the construction sector,” he said.

“Although there are internal and external shocks, if we implement the macro policy effectively, we forecast the country’s GDP growth will be 6.1 percent in 2020,” Vongsey added.

“We have strong fundamentals and we have resources including government savings, strong foreign reserves, good public financial management.

“If we act efficiently, we will not drop fast. Att least we should have around 6.1 percent of GDP growth.”

He added that Cambodia might be affected by a drop of 20 percent in the garment sector among total export value to the EU and 30 percent in the shoe industry. The construction sector is also declining and the tourism sector is expected to drop this year.

“However, our economy will not collapse,” he insisted.

“Our economic growth will slow down in some sectors, but it will also increase in some sectors. Therefore, we are not much concerned over these issues,” Vongsey stressed.

The Secretary of State said last year Cambodian exports to the EU dropped to around 10 percent of the total, but exports to the US increased to 30 percent.

The non-industrial sector is also increasing to 12 percent per year. That includes assembly, motors, electronics and solar panels, so Vongsey said the nation is starting to diversify export products fast. He noted garment exports grew 5 percent.

“We have already prepared a fiscal policy to cope with uncertainty and continue the implementation of the government’s policies and to enforce them more firmly to prevent shocks or crises.

“We want to transform the shocks or threats or other crises into opportunities and reform the economy and implement effectively the government’s policies,” Vongsey said.

“We have to strengthen public work. The state must be strong, transparent and wise,” he added. “We need a strong public administrative government: plans, strategy and implementation. Quality and ability, good communication by civil servants, clarity of role and duty are also important.

“We must provide public service efficiently,” Vongsey pointed out.

“There is big pressure, high risk both internally [from the Everything but Arms (EBA) deal outcome and also externally in 2020.

“However, Cambodia has strong fundamentals. We have a package of reserves. We have policies to implement. We will do this together in the right way and efficiently,” Vongsey concluded.


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