The ministry’s General Department of Budget director general Hav Ratanak said that the government had already raised the US$3 billion to mitigate any shock from a possible withdrawal. -Photo taken from phnompenhpost

THE CAMBODIAN government has reserved around US$3 billion (RM12.5 billion) to cope with a possible suspension of its access to the EU’s preferential “Everything But Arms” (EBA) agreement.

According to the Phnom Penh Post, the Economy and Finance Ministry said that the government did not spend all of the revenue collected from taxes and it had enough savings to deal with any possible crisis in the future.

The ministry’s General Department of Budget director general Hav Ratanak said that the government had already raised the US$3 billion to mitigate any shock from a possible withdrawal.

The ministry’s under secretary of state Phan Phalla said Cambodia had maintained economic growth of around seven per cent for more than two decades, with hardly any country in the region coming close to this.

The International Monetary Fund (IMF) has projected Cambodia's economic growth to be highest in the Asean region, expanding by seven per cent this year before easing to 6.8 per cent next year.

However, if the EBA is withdrawn, Cambodia’s economic growth would probably drop to 6.5 per cent next year.

The expected decline could also be attributed to a global economic slowdown caused by the Sino-US trade dispute.

“The growth is still indicative of Cambodia’s strength and the government’s preparedness,” Phalla said.

The EU launched the EBA withdrawal procedure earlier this year after citing a deterioration of democracy and respect for human rights in Cambodia.

It handed over its report to the Cambodian government earlier this month following a three-month investigation and gave the government a month to respond.

Cambodia is the second-largest beneficiary of EBA trade preferences, accounting for 18 per cent of all imports to the EU market under the EBA scheme last year, the European Commission said on November 12.

The Kingdom’s exports to the EU last year totalled €5.3 billion ($5.8 billion) – 95 per cent of which entered the EU duty-free.

(FilePic) Cambodian rescuers search for victims from the collapse construction site in a Buddhist temple in Siem Reap on December 2, 2019. - Two workers died and ten others were seriously injured in the collapse of a dining hall under construction in a temple in Cambodia. -AFP

In another development, the Cambodian government plans to increase the revenue raised from taxation next year.

The 2020 national budget approved this week targets a 28.1 per cent increase in revenue collection from customs and excise next year, reaching around US$2.87 billion (RM12 billion) or 17.72 per cent of its gross domestic product (GDP).

It also hopes revenue from tax collections would increase by 21.3 per cent to more than US$2.33 billion (RM9.7 billion), accounting for 7.93 per cent of GDP.

However the government will not impose any new taxes or increase existing tax rates.

Minister of Economy and Finance Aun Pornmoniroth said that while Cambodia’s economy remained strong, the government had to spend more to sustain the economy and boost domestic revenue via the collection of tax and customs duties.

“The government has achieved good results in public financial management with the sound, sustainable and efficient collection of all types of taxes.

“This proves the strength of the Cambodian economy, despite the global economy facing greater risks than before. Higher revenue collection helps strengthen Cambodia’s budget independence, and gives the government greater control,” he said.

The IMF had also said that Cambodia’s robust revenue performance has continued due to strong administrative efforts that resulted in tax revenues nearing 19 per cent of the GDP last year.

It said Cambodia’s public debt remained low, at 28.6 per cent of GDP last year.

Cambodia is also expected to remain at low risk of debt stress despite an increase in both debt disbursements and public-private partnerships to finance needed infrastructure investment.