5 Nov 2009

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.

Thaksin Shinawatra

Thaksin Shinawatra appointed economics adviser to Cambodia

Thailand's ousted Prime Minister Thaksin Shinawatra has thanked Cambodia for appointing him as an economics adviser, even though the move is likely to further damage relations between to the two countries.

The decision by the Cambodian Prime Minister Hun Sen to appoint Mr Thaksin — still a deeply divisive figure in Thailand — follows a border dispute that has led to small but deadly military skirmishes over the past 18 months.

Responding to a congratulatory message from a supporter posted on his Twitter page, Mr Thaksin thanked Mr Hun Sen for the appointment.

“I thank Mr Hun Sen for giving me such an honour,” Mr Thaksin tweeted in Thai from Dubai, where he has spent much of his time since being ousted in a 2006 coup. “But I would have more enjoyment if I could work to eradicate Thai people's poverty.”

In Thailand, Suthep Thaugsuban, the Deputy Prime Minister, played down the move and said it would not affect bilateral relations between the Southeast Asian neighbours.

“It's a domestic affair for Cambodia to appoint anyone. We cannot interfere,” Mr Suthep said. “If we like or dislike the person they appoint, we can't bluster about it.”

Mr Thaksin has been living mostly in self-imposed exile since he was overthrown after six years as prime minister. He was accused of corruption and abuse of power and insulting the country's constitutional monarch, King Bhumibol Adulyadej.

Mr Thaksin was convicted in absentia last year of violating a conflict of interest law and sentenced to two years in prison. Thai officials claim he is trying to undermine the Government to regain power.

Mr Hun Sen called a stir at a meeting of Asian leaders in Thailand last month by declaring that Mr Thaksin was welcome to take refuge in Cambodia. He said that Mr Thaksin was a friend and had been prosecuted unfairly for political reasons.

Thailand responded by saying it would seek to extradite Mr Thaksin if he went to Cambodia. Cambodia in turn said it would reject any such request.

Mr Thaksin, a former telecommunications tycoon, had substantial business interests in Cambodia and was accused of pursuing special deals there for his family-controlled conglomerate while prime minister.

He has travelled since the coup to Dubai, Hong Kong, Nicaragua, Liberia and Montenegro in pursuit of investment opportunities.

Mr Thaksin remains widely popular among Thailand's rural people and the urban poor, who benefited from his social welfare policies. He is still highly influential, rallying protesters in telephoned speeches from aboard.

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