[{"bbox": [83, 118, 1147, 200], "category": "Text", "text": "in revenue collection and stable macroeconomic performance, which put the country in a solid position to withstand the external shock of Covid-19. Without these measures, incomes and employment would likely have fallen further. In its Article IV report of December 2021, the IMF considers government response as appropriate."}, {"bbox": [83, 212, 1147, 479], "category": "Text", "text": "**Monetary policy:** The NBC issued its third round monetary easing measures in May 2021 to: (i) maintain a reserve requirement ratio at 7% for both riel and USD deposits and borrowings until further notice; and (ii) allow the banking and microfinance sectors to continue to restructure loans until the end of 2021 (by mid-2021, 11% of loans had been restructured). The NBC has taken steps to reduce risks from restructured loans. Support to banks has softened the impact of the pandemic on borrowers, but losses on restructured loans are likely to weaken capital positions and could potentially undermine the ability of the financial sector to finance the recovery. To mitigate such risks, the NBC instructed banks and financial institutions in December 2020 to suspend dividend payments in 2020 and proactively requested capital increases from those institutions for which buffers appeared to be relatively low. The NBC also required banks to conduct stress tests on the restructured portfolio in 2021. In September 2021, the NBC introduced a Marginal Lending Facility to provide short-term liquidity to the banking sector."}, {"bbox": [83, 491, 1147, 653], "category": "Text", "text": "**Fiscal policy:** Fiscal expansion will continue with Budget 2022 increasing expenditures by 8.4% (reaching 27.9% of GDP against 27.7% of GDP in Budget 2021), of which current expenditure increases by 11.2% (reaching 16.7% of GDP against 16.2% of GDP in Budget 2021). Capital spending marginally increases by 4.5% in Budget 2022, at 11.1% of GDP, down from 11.5% of GDP in Budget 2021. Thanks to improved revenue collection, the overall fiscal deficit is set at 7.1% of GDP, down from 9.1% of GDP in Budget 2021. Total public debt is expected to continue to increase slowly, from 36% in 2021 to 36.4% in 2022 (IMF)."}, {"bbox": [83, 667, 731, 695], "category": "Text", "text": "**Policy recommendations of the IMF Art. IV report of December 2021:**"}, {"bbox": [83, 699, 1147, 806], "category": "Text", "text": "On the back of an uncertain outlook with main risks being the course of the pandemic, banks loan portfolios concentrated in the real estate, and climate change impact (droughts and floods), the IMF recommends policies to remain supportive in the near term, and be more finely targeted as the economy recovers, allowing more resources for measures to increase resilience and adaptability in the medium term."}, {"bbox": [120, 806, 1147, 887], "category": "List-item", "text": "- Fiscal policy should continue to prioritize healthcare and social assistance. Support to firms and workers should be costed and regularly evaluated. Revenue mobilization, broadening the tax base, and the development of a sovereign bonds are essential to increase financing flexibility."}, {"bbox": [120, 887, 1147, 994], "category": "List-item", "text": "- Macro- and micro-financial policies: Supervisory standards should be gradually normalized with a carefully calibrated sequence of steps to gradually return to standard prudential requirements. Reforms should continue to close supervisory gaps and bolster the financial safety net. Addressing deficiencies in the AML/CFT regime is an urgent challenge."}, {"bbox": [120, 993, 1147, 1074], "category": "List-item", "text": "- Structural policies to improve fundamentals such as institutions, education and welfare, and technological readiness remain crucial to boost potential growth and diversity. Particular focus should be directed at tackling labour informality, addressing corruption concerns, and adapting to climate change."}, {"bbox": [83, 1087, 1147, 1139], "category": "Text", "text": "**In conclusion, the authorities are pursuing a stability-oriented macroeconomic policy and the eligibility criterion is met.**"}, {"bbox": [147, 1156, 524, 1186], "category": "Section-header", "text": "### 2.3.3. Public Financial Management"}, {"bbox": [83, 1220, 1147, 1435], "category": "Text", "text": "Cambodia's PFM system is regularly the object of standard diagnostics such as PEFA assessment reports as well as Public Expenditure Reviews and Public Expenditure Tracking Surveys. The 2020 PEFA assessment report (finalised in June 2021) noted that overall, the country's PFM systems have significantly improved in the areas related to fiscal and budget management but improvements are still needed in areas related to fiscal transparency and reporting, public investment management, medium-term budgeting, expenditure arrears and payroll. Comparison with the previous 2015 PEFA exercise shows improvement in 9 indicators, and deterioration in 2 indicators. The PEFA report provides a summary of key issues for each of the main PFM objectives, i.e. aggregate fiscal discipline, allocative efficiency, operational efficiency and integrity of fiscal information:"}, {"bbox": [93, 1448, 1147, 1662], "category": "List-item", "text": "- **Aggregate Fiscal Discipline** has improved as well as budget credibility in terms of expenditure and revenue administration management, State Owned Enterprises (SOEs) monitoring, transparency of taxpayer obligations and liabilities, with areas for possible improvements. Budget outturn is closely aligned to budgeted expenditure aggregates (PI-1, rated 'A'), but revenue forecasting is underestimated. Weaknesses have been identified in revenue arrears management. An orderly and timely budget preparation process ensures that all budget entities have ownership of their budgets and know their final budget allocations well before the start of the fiscal year but budgets are submitted without final hard budget ceilings and alignment to strategic sector plans is limited to two sectors (Education and Health). Timely budget execution reports are published monthly and are instrumental"}, {"bbox": [1040, 1663, 1157, 1687], "category": "Page-footer", "text": "Page 11 of 31"}]