World Bank approves $275 mn credit to boost Cambodia's economic growth

The World Bank Board of Directors has approved a $275 million credit to support Cambodia's efforts to promote long-term economic growth and resilience. This financing, sourced from the low-interest International Development Association (IDA) funds designated for developing countries, aims to foster reforms that enhance private sector competitiveness, strengthen Cambodia’s fiscal position, and provide assistance to the most vulnerable populations.

This credit is for the Second Cambodia Growth and Resilience Development Policy Financing Project, addressing the challenges that have hindered the country's efforts to recover from the lingering economic effects of the COVID-19 pandemic. It builds on the $274 million first Cambodia Growth and Resilience Development Policy Financing approved in 2022, World Bank said in a press release.

The COVID-19 pandemic led to Cambodia’s first economic contraction in 25 years, one of the most severe in East Asia. Although the economy has since rebounded, growth has not yet returned to its pre-pandemic trend. This situation is attributed to both the global economic slowdown and structural challenges within the country's growth model. Cambodia faces issues such as weak productivity growth, low human capital formation, and barriers to private business formation and competition. Additionally, Cambodia's highly concentrated economy—in terms of products, export markets, and financing sources—makes it vulnerable to shocks. The country is also highly susceptible to the impacts of climate change, particularly floods and droughts.

The new operation supports reforms to tackle these challenges by creating an environment where firms can enter, exit, and compete fairly. Additional reforms will enhance fiscal resilience by improving spending efficiency, mitigating risks associated with capital expenditure and public-private partnerships, and strengthening the government’s capacity to raise financing through sovereign bonds.

Furthermore, the operation will facilitate the timely provision of relief to a broader set of vulnerable households in the event of natural disasters or economic shocks. It also aims to improve environmental regulation and bolster disaster risk management.

“While Cambodia’s economy has recovered from the impacts of the COVID-19 pandemic and subsequent shocks, the focus is now shifting toward achieving sustained high-quality growth,” said Maryam Salim, World Bank country manager for Cambodia. “This new operation will boost private sector competitiveness, strengthen the government’s fiscal position, provide assistance to the most vulnerable Cambodians.”

Fibre2Fashion News Desk (DP)