Draft budget approved

via CAAI

Sunday, 17 October 2010 22:20 Nguon Sovan and James O’Toole

The Council of Ministers has approved a draft budget law for 2011 calling for an increase in spending of more than US$400 million compared to last year, including a $22 million rise in national security and defence spending.

Although a sector-by-sector breakdown of the budget was not available, Cheam Yeap, the chairman of the National Assembly’s Banking and Finance Committee, said spending would target key “social needs”.

“For Cambodia, our priority sectors are still education, health, rural development, agriculture, women’s affairs, social affairs and physical infrastructure,” Cheam Yeap said.

The draft budget calls for $2.4 billion in spending for 2011, up from $1.97 billion for this year, for a roughly 18 percent increase. This year’s $1.97 billion represented roughly a 4.6 percent increase from the previous year.

Council of Ministers spokesman Phay Siphan said the budget for defence and security spending had risen from $276 million to $298 million. This bump, he said, had been driven mainly by the military wage bill.

“The government raises salaries for them by 20 percent annually and has to pay benefits to retired officials,” he said. He could not provide detailed data on allocations for other sectors, but said “social sectors” had been the focus.

Officials at ministries including Education and Rural Development could not be reached for comment yesterday. Minister of Health Mam Bunheng said he was busy when asked about next year’s health spending.

Voice of America reported on Friday that the Ministry of Health was allocated $165 million for 2011 and the Ministry of Education budgeted $218 million, representing year-on-year increases of $21 million and $20 million – or 13 percent and 9 percent.

The 7 percent increase in defence spending fell far short of last year’s 24 percent rise, which drew criticism from civil society groups that said it was unjustified in view of the Kingdom’s needs in other sectors. Still, it is likely to be viewed with some annoyance by donor countries, who have continually pushed the government to direct more revenue towards its self-described “priority” sectors, said Carlyle Thayer, a professor at the Australian Defence Force Academy.

“It’s a pebble in the shoe,” Thayer said. “It’s an irritant, but [donors] have got a lot of scar tissue.”

In June, donors announced a record $1.1 billion in development assistance for the subsequent 18-month period.

Cheam Yeap said the government could tap its $95 million reserve budget if further funding was needed for national security and defence. In addition, Prime Minister Hun Sen signed a document in February approving a controversial programme in which local businesses provide funding to military units.

Chheng Kimlong, a lecturer in economics at the University of Cambodia, said the government would do well to focus spending on sectors that “reproduce investment or another stream of revenues”, including education and infrastructure development.

The government deficit was 5.9 percent in 2009 and will drop to roughly 5.3 percent this year, according to the Asian Development Bank. Although spending is set to increase 18 percent in 2011, ADB senior country economist Peter Brimble said this should not jeopardise what the International Monetary Fund described in September as the Kingdom’s “favourable debt sustainability outlook”.

“In the decision to increase the budget to this amount, we would be confident that the government would be careful to balance their objectives to reduce poverty against the need to maintain responsible debt-management practices,” Brimble said.