Cambodia Investment Review
Cambodia’s public debt stock climbed to $12.03 billion by the end of 2024, reflecting a 2% increase from 2023, according to the latest Cambodia Public Statistical Bulletin (Vol. 25) released by the Ministry of Economy and Finance (MEF). While borrowing levels continue to rise, government officials maintain that Cambodia’s debt remains sustainable and at low risk, with key indicators well below global warning thresholds.
However, with higher borrowing costs, rising repayment obligations, and increasing infrastructure financing needs, policymakers are under pressure to balance growth ambitions with fiscal discipline.
Debt Composition: Foreign Loans Dominate
The report highlights that Cambodia remains heavily reliant on foreign financing, with 99% of its debt owed to external creditors. The country’s total external public debt reached $11.92 billion, while domestic public debt stood at just $115 million.
Breakdown of external debt:
- Bilateral partners: 62%
- Multilateral lenders: 38%
- Major creditors: China, Japan, France, South Korea, World Bank, Asian Development Bank (ADB)
In terms of currency composition, Cambodia’s debt portfolio is largely denominated in U.S. dollars (49%), followed by Special Drawing Rights (SDR) (18%), Japanese yen (10%), Chinese yuan (10%), and euros (8%). This heavy reliance on foreign currency borrowing makes Cambodia vulnerable to exchange rate fluctuations, though the dollar-heavy portfolio mitigates some risks.
Government Secures $1.8 Billion in New Loans
Cambodia continued to tap into concessional financing in 2024, signing $1.8 billion in new loan agreements with development partners, just below the $1.7 billion SDR borrowing ceiling (approximately $2.3 billion USD).
Loan distribution in 2024:
- Bilateral loans: 39%
- Multilateral loans: 61%
In the final quarter of 2024 alone, Cambodia secured $763.83 million in new financing. The government has largely maintained a strategy of securing long-term concessional loans, which offer low interest rates and extended repayment periods, ensuring manageable debt servicing costs.
Where is the money going?
- 67% of new disbursements were directed toward infrastructure projects, including roads, bridges, irrigation, and energy.
- 33% went to health, education, and economic development initiatives.
The MEF has positioned these borrowings as essential for sustaining economic growth, ensuring long-term productivity, and improving Cambodia’s connectivity to regional and global markets.
Debt Servicing Costs Jump 8%
Cambodia’s debt repayments rose sharply in 2024, with total debt service payments reaching $558.77 million—a significant 8% increase from 2023.
Debt repayment breakdown:
- External debt service: $542.79 million
- Principal payments: $419.14 million
- Interest and other fees: $123.65 million
- Domestic debt service: $15.98 million
- Principal payments: $12.72 million
- Interest payments: $3.27 million
While the increase in debt servicing costs reflects Cambodia’s growing repayment obligations, the government insists that these payments remain manageable within its current revenue framework.
Domestic Borrowing and Bond Market Development
To diversify financing sources, Cambodia issued $74.86 million in government bonds in 2024, covering 68% of the legally permitted borrowing limit (KHR 440 billion). This is part of the government’s broader strategy to develop the domestic bond market, reducing reliance on external lenders over time.
The bond issuances provide local financial institutions and investors with an opportunity to participate in public financing while allowing the government to finance domestic infrastructure projects without increasing external debt risks.
Read More: IBC-Private Sector Working Group Engages Cambodian Government to Address Urgent Key Economic Challenges
Debt Sustainability: Still Safe, But Risks Emerging
Despite rising debt levels, the Cambodian government maintains that public debt remains at low risk, citing strong fiscal management and stable macroeconomic conditions. According to the Debt Sustainability Analysis (DSA) for 2024, key debt indicators remain well below global risk thresholds.
Key indicators:
- Public debt-to-GDP ratio: 19.3% (well below the 55% danger level)
- External debt-to-GDP ratio: 19% (below the 40% risk threshold)
- Debt service-to-exports ratio: 1.8% (low risk)
- Debt service-to-government revenue ratio: 7.8% (manageable)
However, with borrowing costs rising globally, Cambodia must carefully navigate risks related to debt accumulation, foreign exchange exposure, and increasing repayment obligations.
Potential Risks on the Horizon
While Cambodia’s debt situation remains stable, economists warn of potential risks that could impact fiscal stability in the coming years:
1. Rising Debt Service Costs
As borrowing increases, so do annual repayment obligations. The 8% increase in debt service payments in 2024 signals a growing fiscal burden that could require stronger revenue generation measures.
2. Exchange Rate Vulnerability
With 99% of Cambodia’s debt held in foreign currencies, any sharp depreciation of the Cambodian riel (KHR) could increase repayment costs in local currency terms, putting pressure on public finances.
3. Fiscal Space for Future Borrowing
While the current debt-to-GDP ratio remains low, continued borrowing at this pace could erode Cambodia’s ability to take on new debt for critical projects in the future.
4. Global Interest Rate Environment
The end of the era of ultra-low interest rates means future borrowing may become more expensive, even for developing economies like Cambodia. Managing concessional financing options will be key to keeping costs under control.
Outlook: Managing Debt While Maintaining Growth
Going into 2025, the Cambodian government is expected to continue borrowing cautiously, prioritizing concessional financing for high-impact infrastructure projects. The MEF has reiterated its commitment to prudent debt management, ensuring that borrowing is aligned with economic growth and revenue generation capacity.
Key strategies moving forward:
- Maintain concessional loan agreements to keep borrowing costs low.
- Expand the government bond market to diversify financing options.
- Improve tax collection and revenue mobilization to sustain debt servicing.
- Invest in infrastructure projects that boost economic productivity.
Despite increasing debt obligations, Cambodia’s public debt remains within sustainable limits. However, continued careful fiscal management will be essential to prevent any long-term financial imbalances.
Cambodia’s public debt strategy for 2025 and beyond will require balancing growth ambitions with fiscal prudence—a challenge that will test the government’s ability to manage rising obligations without compromising long-term economic stability.
