Inflation Hits Cambodia [-Annual food inflation: 24%, one of the highest in SE Asia]

By Rory Byrne, VOA
Phnom Penh
18 April 2008

"Cambodia's annualized rate of food inflation hit 24 percent last month, the highest in almost a decade, and one of the highest in Southeast Asia"
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"...most poor rice farmers in Cambodia will run out of their remaining rice stocks by June at which point they will have to buy rice at the market. That means that the worst effects of high inflation on the poor may be yet to come"

As in other developing countries from Egypt to Haiti, soaring inflation has recently emerged as a threat to Cambodia's hard won social stability. While wages have remained low, the price of rice and other staples have skyrocketed pushing millions deeper into poverty. While the Cambodian government says it is doing its best to curb the worst effects of inflation, opposition politicians say it is not doing enough. Rory Byrne reports for VOA from Phnom Penh.

On the face of it, Cambodia's economy is doing well.

Phnom Penh, the nation's capital, is undergoing a building boom which is changing the face of the city.

Expensive new cars fill the city's streets as a resurgent middle class has emerged to take advantage of new business opportunities.

But while some are prospering, many of the country's poorest people are slipping deeper into poverty. The reason is inflation.

While the incomes of the poor have remained constant, the price of food and other staples have risen dramatically.

Cambodia's annualized rate of food inflation hit 24 percent last month, the highest in almost a decade, and one of the highest in Southeast Asia.

The price of staple goods has fluctuated week by week. Prices for pork, chicken, beef, and prahok - a pungent fish paste that is the main source of protein for millions of poor Cambodians - have all jumped.

"Last month I sold a kilo of prahok for 60 cents but today it costs a $1.50,” the market keeper said.

"Last week I sold beef for $1.25, but today it costs $2.00,” the market keeper added. "One kilo of dried fish now costs $6.00. Last week it was $5.00.”

The prices of non food items -- such as gasoline and cooking gas -- have also increased, adding to the country's inflation woes.

But it is the high cost of rice that is causing the most concern, according to the World Food Program which feeds almost a million poor Cambodians.

Thomas Keusters, the WFP's Country Representative in Cambodia, says the high cost of rice on the world market has led many growers to export their crop, driving up the domestic cost of the grain.

"There are not that many big exporters of rice so obviously those who are producing rice in this country see a benefit of seeing the rice going out of the country,” Keusters said. “Secondly, in general I think there has been an increase in the cost of producing rice, so by definition, people are producing, or selling rice more expensively."

He adds with money running out, the WFP is in danger of running out of its remaining rice reserves in a matter of weeks: "Cambodia's rural poor, who make up over 80 percent of the population, are particularly at risk from inflation."

Many are poor rice farmers who only grow enough rice to feed themselves and their families for half the year

For the rest of the year they rely on handouts from the WFP, or they harvest wild plants and fruits from the forest which they sell to buy rice. High prices at the market mean that they cannot buy enough to feed their families.

Chanmom lives with her family in a small village in Kompong Speu province north of Phnom Penh.

"I sell wild fruit and bamboo to make a living. That is all I can do. If there is no bamboo or fruit I have nothing. That's all I can do to stay alive. I don't have any cows or rice fields only this old house. Now it is very difficult for me to feed my family because the price of food and rice is increasing," she said.

With a general election in July, inflation has become a highly politicized issue in Cambodia. Marchers in this recent demonstration organized by the main opposition party in Phnom Penh accused the government of not doing enough to curb soaring prices.

Sam Rainsy is the leader of the main opposition Sam Rainsy Party. "We want the government to take appropriate measures to stop or to curb inflation. And we want the government to increase salaries for civil servants, wages for workers," Rainsy said.

For its part, the government says it is doing what it can. On the orders of Prime Minister Hun Sen, rice exports have been banned for two months while tons of surplus rice were released onto the market at reduced prices.

A ban on pig imports was also lifted in a bid to lower pork prices.

While these measures have had some success, experts expect that, as in the rest of the world, prices here will continue to rise over the long term. And that - the World Food Program says - could have damaging long term consequences,” he said.

"A lot of people who are now on the verge of surviving are going to face even more difficulties to make ends meet and really survive. This is condemning possibly a whole lot of generations because people will not go to school, people will not go into productive activities, because they will really be constrained by their search for food," Keusters said.

Experts say that most poor rice farmers in Cambodia will run out of their remaining rice stocks by June at which point they will have to buy rice at the market. That means that the worst effects of high inflation on the poor may be yet to come.