Cambodia Hit Hard By Inflation

A general view of a market in Phnom Penh on, 25 Mar 2008

By Rory Byrne
Phnom Penh
21 April 2008

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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 prices of rice and other staples have rocketed - 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. Double-digit growth in recent years has created a resurgent middle class, eager to take advantage of new business opportunities.

Phnom Penh and other cities in Cambodia are undergoing a building boom and expensive new cars are everywhere. But while some are prospering, many of the country's poorest people are slipping deeper into poverty.

While the incomes of the poor have remained constant, the prices 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.

Haggling in the market is fierce these days as 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.

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

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," he 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."

Keusters says that the World Food Program is in danger of running out of its remaining rice reserves in a matter of weeks:

"Because of the increasing cost of the food, and the insufficient support we have been receiving from the international and the national donor community, we are going to very much face a risk of stopping our operation within a matter of weeks," Keusters said.

That could have a devastating effect on Cambodia's rural poor, who make up about 80 percent of the population.

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 World Food Program, 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, 46, lives with her sick husband and three young children in a small village in Kompong Speu province north of Phnom Penh. She is the only breadwinner.

She says she sells fruit and bamboo to make a living and that is all she can do to stay alive. She says does not have any cows or rice fields, only an old house. She says it is very difficult to feed her family because the price of food and rice is increasing.

Inflation has become a highly politicized issue in Cambodia. Marchers in a recent demonstration organized by the main opposition party in Phnom Penh accused the government of not doing enough to curb soaring prices.

Sam Rainsey is the leader of the main opposition Sam Rainsey Party.

"We want the government to take appropriate measures to stop or to curb inflation," he said. And we want the government to increase salaries for civil servants, wages for workers."

The government says it is doing what it can. On the orders of Prime Minister Hun Sen, rice exports were 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 short-term success, economists expect that, as in the rest of the world, prices will continue to rise over the long term. And that - the World Food Program says - could have damaging long-term consequences:

"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," he said. "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."

Most poor rice farmers in Cambodia are expected to run out of their remaining rice stocks by June, at which point they will have to buy rice at the market.