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

23. External Debt

485 Chapter 23 External Debt 23.1. Definitions 23.1.1. Central Government Debt The central government debt includes: ⇒ In the strict sense: • Domestic and foreign loans taken out by the government. • Domestic and foreign loans guaranteed by the government. • Treasury bonds (and other public securities). • Treasury debt towards the Central Bank. ⇒ In the broad sense, the following items are also included: • Deposits of Treasury correspondents (private persons, companies and agencies authorized to deposit funds on Treasury accounts). • Any budget arrears. Given the current organization of the Ministry of Economy and Finance in Cambodia, government debt management is shared among three agencies: • Treasury Directorate: for the domestic debt, except for domestic loans in foreign currency that are managed by the Directorate for Investments and Cooperation (DIC). • Debt Management Unit of the DIC: for the foreign debt, as well as for domestic loans in foreign currency. • National Bank of Cambodia (NBC): for the balance of payment support loans granted by the International Monetary Fund. 486 23.1.2. Foreign Debt The foreign debt of a country is the total of long-term debts owed by residents of this country to non-residents. This definition and the following ones are provided by the World Bank. They are of high importance for at least two reasons: • Debt data make it possible to measure the country’s debt-servicing capacity and are necessary to draw up the balance of payments. • Long-term debt means a loan or an obligation with a maturity of more than one year from the date it was issued. The length to be considered is that which separates the date of loan agreement signature (loan commitment date) from the last payment due date. (It is noteworthy that debts with an initial maturity of less than 2 years rather than 1 year are considered as short-term debts by certain countries. However, the World Bank definition is the one we will use, as it serves as the basis for the compilation of international statistics.) Non-resident means any person or organization which has no physical presence in the country concerned: non-resident natural persons, foreign companies (except for their branches in the country concerned) and international organizations. This definition tallies with that of the Balance of Payments Manual. Foreign long-term debt comprises two categories: Public debt and private debt. 23.1.2.1. Foreign Public Debt Foreign public debt includes: • Foreign debt of the public sector • Private foreign debt guaranteed by the public sector. The Ministry of Economy and Finance’s Debt Management Office monitors carefully each of these debts, from incurrence to extinguishment. A file is opened for each debt. On the other hand, the private foreign debt is not monitored in detail. It is therefore be necessary to define precisely the meaning of public sector. The public sector comprises the following institutions: 487 • The State, i.e. the government with its ministries and administration. • The government’s foreign debts are easy to inventory and monitor since they are entered in the budget under resources at the time of their incurrence and under expenditures for interest payment and repayment of the principal. • Regional and local authorities: provinces and municipalities; (in Cambodia, it was not until 1997 that regional and local authorities were granted financial autonomy and, until then, they could not take out loans). • Central Bank (National Bank of Cambodia). • Standalone public institutions, such as public institutions. • National companies (state-owned companies); • Companies in which the government holds more than half the shares along with the right to vote or where more than half of the members of the board of directors are government officials (semi-public companies). The debt secured (or guaranteed) by the public sector refers to debts of private agencies for which the government or a public body has made a commitment to ensure payment of interest and repayment of the principal, should the debtor default. Loan guarantee from the government, i.e. contingent liability, is to be granted very cautiously or even refused altogether as regards private companies. However, the government often grants guarantee on loans taken out by public entities or semi-public companies when the lender hinges granting of the loan upon such guarantee. Until now, Cambodia’s foreign public debt is composed mainly of loans directly granted to the government. However, more and more it also includes loans guaranteed by the government for a number of power plant construction projects...