In view of the World Bank’s decision to increase interest rates from 0.7 percent to 2.8 percent the Cambodian government has decided to temporarily suspend lending from the international institution.

Permanent Secretary of State of the Ministry of Finance and Economics Vongsey said,

“This is unacceptable…and has forced us to decide to temporarily stop borrowing from this institution,” Vongsey said.

He hopes that the World Bank will reconsider and maintain the original preferential interest rate, especially during the COVID-19 pandemic.

“If (the World Bank) still disagrees, we will turn to other partners, including Japan, South Korea, the Asian Development Bank and the European Union (EU),” he said.

He also said that Cambodia is considering applying for a loan from the Asian Infrastructure Investment Bank (AIIB) for the first time because its borrowing cost is lower than that of the World Bank.

He emphasised that Cambodia’s foreign debt is at a manageable level. In 2018, Cambodia’s foreign debt to gross domestic product (GDP) ratio was32 percent, which is lower than the international average.

According to this year’s government budget, the government plans to borrow 2 billion US dollars. The foreign debt will be used to promote a number of development projects, including energy, irrigation systems, infrastructure, and other priority development areas, such as agriculture, health, tap water supply as well as training and education.

According to the budget, the Cambodian government has signed 29 loan agreements with countries and development partners to promote the above-mentioned projects.

As of 2020, Cambodia’s foreign debt had reached 8.86 billion U.S. dollars. China is Cambodia’s largest creditor country, accounting for 45 percent of the Kingdom’s total foreign debt, followed by Japan at 6.2 percent and South Korea at 4.63 percent.