[{"bbox": [97, 153, 1134, 207], "category": "Text", "text": "liabilities of the sovereign debt. The level of private debt is very high and a source of concern with a potential drag on the economy if borrowers struggle to meet repayments."}, {"bbox": [97, 207, 1134, 337], "category": "Text", "text": "**Despite the new pressures, the recovery is projected to continue.** Domestic revenues reached 22.1% of GDP in 2022, slightly increasing from 2021 (21.6% of GDP). Inflation is expected to decelerate to 4.2% and 3.8% in 2023 and 2024, respectively, assuming it remains mostly confined to imported goods. Uncertainty around the outlook is particularly high, and risks are tilted to the downside notably due to the prolonged Russian war on Ukraine."}, {"bbox": [97, 338, 1134, 471], "category": "Text", "text": "**Macroeconomic policy:** Against this background, the most recent Article IV consultation between IMF staff and Cambodian Authorities was done in September 2022 and the report was published in December. The main issues discussed with regard to stabilising the macroeconomic framework were related to the very high level of private debt and the need to rein in credit growth, fiscal support targeting, revenue mobilisation and diversification, and the need for structural reforms aimed at improving the investment climate."}, {"bbox": [97, 471, 1134, 604], "category": "Text", "text": "**Monetary policy:** The National Bank of Cambodia (NBC) has maintained reserve requirements and the level of the capital conservation buffer but has ended forbearance on restructurings from July 2022. The NBC needs to continue to normalize prudential conditions to pre-pandemic settings, so that the financial system is able to withstand future shocks. The potential for high debt levels to persist emphasizes the importance of implementing corporate insolvency, debt and bank restructuring, and deposit protection frameworks."}, {"bbox": [97, 604, 1134, 763], "category": "Text", "text": "**Fiscal policy:** On the budget side, the 2023 Budget Law reflects a revival in the trend of continuous expansion of the national budget, which was interrupted only in 2021. On the revenue side, the Government intends to focus on expanding the tax base and improving compliance through undertaking more reforms in the revenue collection agencies in ways that service delivery environment is favourable for the private sector. The IMF considers that current fiscal plans appropriately balance some continued stimulus in the near term, providing insurance against downside risks to aggregate demand, with steady reductions in the deficit over the medium term"}, {"bbox": [97, 789, 1099, 840], "category": "Text", "text": "**In conclusion, the authorities are pursuing a stability-oriented macroeconomic policy and the eligibility criterion is met.**"}, {"bbox": [85, 855, 437, 882], "category": "Section-header", "text": "### 2.3.3 Public Financial Management"}, {"bbox": [97, 897, 1134, 1030], "category": "Text", "text": "**The PFM Reform Programme (PFMRP) was launched in 2005 and currently stands in its 3rd stage (2016-2020, extended to 2022).** The PFMRP is further declined in a series of PFM strategies. It is implemented through the consolidated action plans (CAPs), which correspond to the reform stages. The 4th stage of the PFMRP has been under preparation since March 2022 and is going to be launched by PM Hun Sen in March 2023 with a new Consolidated Action Plan 4 (CAP4), covering the period 2023-2027."}, {"bbox": [97, 1031, 1134, 1214], "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."}, {"bbox": [97, 1215, 1134, 1507], "category": "Text", "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. Timely budget execution reports are published monthly and are instrumental for monitoring the aggregate revenue and expenditure. Cash flow forecasts provide reliable information to line ministries and facilitate the planning of their expenditure commitments. Revenue administration systems ensure effective registration of taxpayers, and relative control over their tax liabilities even if tax arrears are not adequately managed and comprehensive reconciliation of revenue accounts takes place only annually. Debt management is adequate, given the moderate debt levels. A comprehensive assessment of fiscal risks and future liabilities from SOEs and other fiscal operations is still lacking."}, {"bbox": [97, 1507, 1134, 1641], "category": "Text", "text": "**Strategic Allocation of Resources** has improved and variance in expenditure composition has decreased. Allocative efficiency is supported by an orderly and participatory approach to the annual budget formulation, including a timely and well-organized legislative review, which prepare their own budgets independently. However, the achievement of high-level strategic policy objectives in public service delivery requires strong policy-budget links with the resource allocation, including over the medium term. The current planning and"}, {"bbox": [1028, 1682, 1144, 1706], "category": "Page-footer", "text": "Page 12 of 34"}]