Country Report Cambodia February 2010

Outlook for 2010-11: Fiscal policy

The weak economy, a lower level of merchandise trade and falling property prices will undermine efforts to increase fiscal revenue. Despite plans by the government to introduce a new property tax in 2010, which will collect 0.1% of the value of properties assessed to be worth over CR100m (US$24,000), fiscal revenue will remain low as a proportion of GDP, and the government will continue to depend on grants and loans from foreign donors to finance its deficit, which is estimated to have widened sharply in 2009. The government had been hoping that oil production from fields in the Gulf of Thailand would provide new tax and royalty revenue, but officials have conceded that oil will not begin to flow until 2013 at the earliest. Weak growth in revenue, combined with a planned increase in expenditure (notably on defence), will ensure that the budget remains in the red in 2010-11. The government does not issue Treasury bills or other securities, and it would therefore meet any financing shortfall by drawing on its bank deposits, which stood at CR2.4trn (equivalent to about 6% of annual GDP) in September.

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