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National Budget Risks High Deficits: World Bank

Cambodia’s recently drafted 2010 budget could put pressure on the economy by running high deficits that exceed external financing, the World Bank said Wednesday.

The Council of Ministers this week green-lighted a $2 billion budget for next year, increasing money allotted for health services and decreasing that for security, in an overall increase of more than $100 million.

The government “is facing difficult choices in drafting the 2010 budget,” the World Bank said in a regional update. “Sustaining high deficits that exceed available external financing would put pressure on macroeconomic stability.”

“The government is trying to bring the fiscal deficit to a level that supports growth—which remains below potential—without compromising macroeconomic stability,” the World Bank said.

Cheam Yeap, a ruling party lawmaker and head of the National Assembly’s finance committee, said the budget suffered from the world economic crisis.

Next year’s budget “cannot avoid difficulty,” he said. “However, the government is prepared to strengthen its macroeconomics with clarity, fairness and goodness.”

Kem Sokha, president of the opposition Human Rights Party, said the government should avoid high deficits, which would require loans from foreign countries and increased taxes.

“The government can increase its expenditure,” he said. “But the government must prevent corruption and collect taxes to avoid the loss of income.”

In the proposed 2010 budget, which must be approved by the National Assembly, expenditure decreased in the ministries of Defense, Education and Interior, but slightly increased for the Ministry of Health.

Cambodia wants to see an annual economic growth rate of 7 percent, while reducing poverty by 1 percent, Council of Ministers spokesman Phay Siphan said.

The economy fell from a nearly 7 percent growth rate in 2008 to a 2 percent contraction so far in 2009, but the Bank said signs of recovery could see a 4 percent growth next year.