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Better Public Financial Management Needed for Further Development, Economist Says

Cambodian men stand near local and international currencies poster during an inauguration ceremony of the Cambodia Securities Exchange in Phnom Penh, file photo.

For Cambodia to provide quality public services will require reform of its financial management system, an economist says.

“Public financial management” is the management of government revenue and expenditures, and it requires strong institutions to build public services like education, health and infrastructure, Heng Dyna, an economist based in Washington, told VOA Khmer in an interview.

“PFM is aimed at managing national revenue and expenditure in an effective and efficient way to accelerate growth and reduce poverty,” he said. “To promote growth and to become a middle income country, it’s necessary for a nation to build strong and efficient financial institutions.”

According to the Law on Public Financial Management, approved by the National Assembly last year, Cambodia’s revenue is expected to reach $2.9 billion in 2015. Its expenditures are expected to be $3.8 billion. The $900 million shortfall will come from foreign aid and other financial assistance.

Complete public finance reform requires four “platforms,” Heng Dyna said: budget credibility, where the state is effective and credible in collecting revenue; internal control that makes managers accountable for following the budget; ensuring budget linkage with policies and service targets; and proper review of finances and performance.

“Currently, Cambodia is in between platforms two and three, as it tries to use the budget to reach the expected outcomes in promoting growth, providing quality public services and reducing poverty,” Heng Dyna said.

But Cambodia is also facing some challenges in achieving effective public financial management reform, he said.

“Cambodia has to build the capacity of institutions in effective financial management,” he said. “It’s critical to allocate the budget effectively for development and economic growth, and that in turn will increase national revenue.”

Meanwhile, eliminating ghost employees, reducing unnecessary expenditures and stopping budget leaks can all help the country save some money for reforming the education and health sectors.

Cambodia may have a long way to go toward strengthening its institutions’ capacity to provide quality public services through public financial management reform. However, Heng Dyna said, “as long as Cambodia can effectively reform its public financial management institutions, increase wage for public servants, and combat corruption, Cambodia should be ready to accelerate growth and achieve sustainable development.