December 1, 2011

Moody’s offers update on Kingdom’s credit outlook


Improved fiscal management and preparation for a decline in foreign aid would help increase Cambodia’s credit rating, according to a quarterly credit opinion from Moody’s Investor Service, which maintained a stable outlook for the country.

Reduced exposure to crisis and stagnation in Western economies, continued foreign direct investment and development in the oil and gas sector offered the chance to up the outlook, according to the report issued on Sunday.

However, it warned of a dearth of debt transparency.

Foreign aid to Cambodia will decline as median income increases, University of Cambodia business and economics lecturer Chheng Kimlong said yesterday.

“One of the most promising things the government can do is promote revenue collection, and not just tax collection,” he said.

Revenues on oil, mining, as well as royalties on Cambodian products, must eventually substitute for foreign aid, he added.

Rule of law and strengthened ethical standards are needed before the country will attract increased foreign direct investment, Chheng Kimlong said.

Cambodia may not see leaps in FDI figures until such improvements are made, he added.

While potential government borrowing for 2012 increased by about 75 per cent to $1.1 billion from last year, information on Cambodia’s debt is still scant, experts said.

Moody’s called the country’s data transparency and timeliness poor. Documents compiled by the NGO Forum on Cambodia showed the country owed US$2.4 billion in concessional loans as of October.

The Moody’s update, however, said total government debt stood at $5.2 billion this year. Only concessional loan figures and interest rates are available to the public, Chea Kimsong, manager of the development issues program at the NGO Forum, said yesterday.

The government does not publish non-concessional and commercial loan data, he said, leaving more than $2.8 billion unaccounted for.

“It’s an issue affecting how we can predict the country’s future debt and national budget,” Chea Kimsong said, adding that the Ministry of Economy and Finance had recently pledged to issue a “debt bulletin”.

The regular publishing of debt stock as is done by other ASEAN countries such as Thailand and the Philippines could attract investment, Christian de Guzman, one of the Moody’s analysts who issued the update on Cambodia, said yesterday via email.

“I believe greater transparency would bolster investor confidence and would be credit positive,” he said.

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