Cambodian Economy: Charting the Course of a Brighter Future - A Survey of Progress, Problems and Prospects

21. State Budget

421 Chapter 21 State Budget The budget is the instrument through which the government implements its fiscal policy; it addresses four key financial functions of the State, namely: (i) resource mobilization; (ii) allocation of resources; (iii) distributive justice; and (iv) macroeconomic stabilization. Prior to 1970, the Cambodian financial system drew its inspiration from the French system and this was repeated with Law No. 1 NS 93 of December 28, 1993 on the Finance Laws and Budget System respecting the financial system and finance laws. This law was updated and replaced by the Law on Public Financial System adopted on 4th April 2008 and promulgated by the Royal Kram No. NS/RKM/ 0508/016 of May 13, 2008. Cambodia’s financial and accounting regulations were consolidated by a series of government decrees, namely: ⇒ Government Decree No. 82 of November 16, 1995 on General Regulations for Public Accounting. ⇒ Government Decree No. 81 of November 16, 1995 instituting Financial Control. ⇒ Government Decree No. 105 of October, 18, 2006 on the Procedures for Public Procurement. These regulations prescribe the legal framework applicable to public financial management. They established the conditions under which financial and accounting operations resulting from implementation of the Budget Laws are performed, recorded in the books, and audited. 21.1. Technical Framework of the Budget In Cambodia, public finance is based on budget principles, rules, and practices linked to the doctrine of the market economy. The technical framework of the budget is determined by the following principles: authoritativeness; annual budget or a twelve - month financial year; comprehensiveness; unity; universality; specialty; balance; accountability; transparency; stability; and achievability. However, the core principles are annual budget, unity, universality, specificity and balance. 422 The annual budget rule prescribes that the State budget be prepared in a yearly framework; the government also produces a three-year budget forecast called the Medium Term Expenditure Framework (MTEF). The budget year starts on January 1 and ends on December 31. The Minister of Economy and Finance (MEF) submits to the Prime Minister a comprehensive budget based on a preliminary set of expenditure priorities and a macroeconomic framework. Once the Prime Minister has approved the budget in principle, the MEF prepares a more detailed budget including such details as the baseline receipts and expenditures envelopes, by negotiating with the line ministries and the Council of Ministers and coming up with the allocations among the ministries. Once approved by the Council of Ministers, the Draft Budget Law is submitted to Parliament—by the end of October at the latest. Parliamentary debate of the budget is to be completed before December 31. The single budget rule prescribes that all the resources and expenditures of the State should be accounted for in one document to be approved by the National Assembly. According to this rule, any collection of receipts or performance any expenditure outside of the approved budget document is prohibited. The gross budget (non-deduction) rule states that adjustments between revenue and expenditure categories is not allowed after the budget is approved by the National Assembly; a ministry or government agency is not allowed to use appropriations of another government entity or use private resources to increase the appropriations allocated to it under the budget law. Exception can be made to this principle only with the approval of the National Assembly as in the recent case concerning the National Election Committee Law. A special account of the Treasury was created outside the approved budget to meet the election expenditures and financed from specific assigned sources. The principle of non -contraction also applies to the gross budget rule. It means that the gross receipts and expenditures must be fixed in the approved budget and that there can be no adjustment in the size of the budget by reducing or increasing receipts and expenditures in a compensatory manner. The rule of budget balance states that the budget is in true balance when the operating account and the investment account are separately voted as balanced, with a transparent assessment of receipts and expenditures in both accounts. 21.2. Budget Preparation 21.2.1. Preparation of the Budget Strategic Plan (March to May) During the first week of March, the Minister of Economy and Finance draws up the framework for the mid-term macroeconomic and public finance policy consistent with the national development policy framework in order to submit it to the Council of Ministers. 423 During the first week of April, the Minister...