Budget shortage looms: SRP

Monday, 16 March 2009
Written by Kay Kimsong The Phnom Penh Post

OPPOSITION lawmakers have called on Prime Minister Hun Sen to account for the large increase in the 2009 national budget, expressing concerns the country lacks the revenue to cover all its slated expenditures during the current global financial upheaval.

In a letter dated Friday, Sam Rainsy Party parliamentarians advised the prime minister to consider amending the 2009 Budget Law, approved by the National Assembly in December, citing a significant drop in customs tax revenue in the first two months of this year.

The Assembly approved US$1.75 billion in spending for 2009, a 28 percent jump on the $1.37 billion spent in 2008.

The letter claims that the Ministry of Finance's General Department of Customs and Excise collected just $64 million in customs tax revenues over January and February, compared with $86 million over the same period last year - a decrease of around 27 percent. Based on these figures, the letter said, tax receipts will fall well short of the $585 million expected in 2009.

"I think the figures show clearly that the government won't be able to collect the amount of customs tax it is planning," said SRP lawmaker Son Chhay.

"My question to the government is what sources of income the government will use for budget expenditures."

He said also that the slowdown in the global economy would likely lead to a further tightening of the state's coffers, estimating that the government would collect a mere 57 percent of its total planned expenditure for 2009.

Minister of Commerce Cham Prasidh and other local and international institutions have forecast that the Cambodian economy will be impacted by the financial crisis, especially in garments, tourism, agriculture and construction - the four pillars of the Kingdom's economy. Earlier this month, the IMF predicted Cambodia's GDP would shrink by 0.5 percent in 2009, a far cry from the government's prediction of a 6 percent rise.

Kun Nhem, deputy director of the General Department of Customs and Excise, agreed that import taxes had declined slightly this year, noting a sharp decline in car, motorbike and gasoline imports.

He said that the financial situation has taken the National Assembly by surprise, and that when it debated the Budget Law in December, no one had expected to face such a severe economic downturn.

He added that the department would review the situation in the first quarter of 2009 and set out a new revenue plan based on the current economic situation.

But National Assembly First Vice President Nguon Nhel said the opposition should not worry about the budget for this year.

"Be aware that the government has already known that this would happen before planning the budget. We do have a package of funds to spare once the financial crisis arrives," he said.

"It is not the right time to ask the government about budget expenditures before the law is implemented."

Khmer Intelligence News - 11 March 2009

11 March 2009

Nearly 80 percent of Cambodians live under poverty line (2)

Government and aid officials claim that the percentage of Cambodians living below the poverty line dropped from 47% to 35% between 1996 and 2006. The fact is that, during that period, the “poverty line” used to assess the number of poor people and defined as a threshold of daily income, was surreptitiously lowered from US$1.00 to US$0.75. Had the “poverty line” not been changed, the percentage of Cambodians living with less than US$1.00 a day would be close to 50%. Moreover, had the “poverty line” been set at US$2.00 income a day as it is in the Philippines and some African countries, the percentage of Cambodians considered as poor would be 77.7% according to the UNDP. See “Over 75 percent of Cambodians live under poverty line” (KI News, 13 January 2008).

Poverty to worsen in 2009 (2)

Given the population increase, inequality in revenue distribution and gross misallocation of resources in Cambodia, a minimum 5 percent annual GDP growth is required to prevent poverty from worsening. For 2009, the IMF has predicted that Cambodia’s economy would shrink by 0.5%, meaning a negative growth leading to a marked increase in poverty.

Sharp drop in customs revenue (2)

In the 2008 state budget, the Customs Department accounted for over 60 percent of all tax revenue, which is a relatively high figure in the region. For 2009, it should collect US$585 million, a figure that now looks impossible to achieve given the ongoing economic slowdown.

For the first two months of 2009, customs revenue reached only US$64 million compared to US$86 million for the same period last year, which represents a 25 percent drop [adjusted for the collection of a US$7 million duty pertaining to 2008].

State budget for 2009 in jeopardy (2)

The government will soon be obliged to revise downward the state budget for 2009 that was adopted last December because it is unable to collect the projected revenue. See above news “Sharp drop in customs revenue” while knowing that the fall in revenue also holds for other sources of income. The projected 2009 budget amounts to US$1.75 billion compared to US$1.37 billion for the 2008 budget, representing a 28 percent increase. This 28 percent increase will likely evaporate and be replaced by a decrease instead. Cambodia is facing the world economic crisis with a collapsing budget, let alone a strong budget with an appropriate economic stimulus package.

Cambodia losing competitiveness because of its dollarized economy (2)

A dollarized economy puts Cambodia in a weak position in the face of the global economic crisis. The fact that Cambodia’s currency, the riel, is pegged to the US dollar is putting pressure on its economic competitiveness as its neighbors’ currencies (Thai baht, Vietnamese dong) depreciate vis-à-vis the US dollar. Little can be done about this in the short term since 95 percent of Cambodia’s money supply consists of US dollars. Paradoxically for the poorer country, the cost of living is higher in Cambodia than in Thailand and Vietnam. For instance, a factory worker can live on a monthly salary of US$60 in Vietnam but not in Cambodia. Cambodia’s economy has been dollarized as a result of weak economic foundations (low productivity, lack of diversification, over-reliance on foreign remittances, shady foreign investors/speculators, cash economy) and poor governance.
_ _ _ _ _ _ _
ARCHIVES

13 January 2008

Over 75 percent of Cambodians live under poverty line (1)

According to the latest official statistics, 35 percent of Cambodians live below the "national poverty line", which is defined as $0.75 of income a day. But if the poverty line is raised to $2 a day, which is the level used to measure poverty in most developing countries in Asia and Africa, 77.7 percent of Cambodia's population live under this more realistic poverty line. The 35 percent of Cambodians identified above through our "national poverty line", are actually those who survive under a "starvation line" of $0.75 a day.

Source: 2007/2008 Reports, Human Development Reports, UNDP.