Cambodia’s foreign owned debt-to-gross domestic product ratio is expected at 34% this year as Ministry of Economy and Finance’s Aun Pornmoniroth announced outstanding external debt will rise to over $10 billion. The IMF has previously said Cambodia can borrow 40% of its GDP before becoming a risk.
Cambodia’s outstanding external debt reached more than $9.18 billion in the first half of 2021 and is expected to reach more than $10 billion this year, an increase from $8.8 billion at the end of 2020.
China accounted for the majority of sovereign debt at 43%, multilateral partners such as the IMF, World Bank and ADB was the second highest at 30% and the remaining 27% was attributed to other individual countries.
According to the ministry national revenue may further decline in 2021 due to the COVID-19 with rising government spending to combat it. They added, the government has spent $829 million on combating COVID-19 in 2020 and expects to expend $1.4 billion this year while allocating an additional $910 million next year.
Meas Sokesensan, Ministry of Economy and Finance (MEF) spokesman told Cambodia Investment Review that yes the country’s outstanding external debt is increasing however the level remains below all four indicators of the IMF Debt risk barometer.
He added, that Cambodia was in fact under all four metrics against the IMF Debt Barometer Cambodia which includes public debt inventory against GDP ratio, foreign public debt inventory against compared with export ratio, debt service compared with export ratio and debt service compared with national income ratio.
Development organizations have recommended Cambodia expands its domestic lending capabilities detailing specifically a sovereign bond issuance in Khmer riels.
According to a UN Development Programme report despite its lower-middle-income status, Cambodia will likely continue to be classified as an Lower Developed Country (LDC) until 2027- 2028. This may result in Official Development Assistance (ODA) declining but will continue to be a resource for the medium term as well as a catalyst for other sources of development finance, the Cambodia Development Finance Assessment report found.
LDC status offers preferential and highly beneficial trade privileges. Continued access to concessional development finance can help consolidate recent advances and address current and emerging development challenges and opportunities.
Cambodia has borrowed around $15 billion from 1993 to 2020 with the vast majority covering infrastructure development.