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2.3 MONETARY AND FISCAL PERFORMANCE |
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49. Monetary developments in 2001 have reflected the improved fiscal position. Broad money supply grew by 20.7 percent in 2001, largely owing to increased foreign currency deposits, while continued fiscal restraint has provided room for private credit to increase by 4 percent. Gross international reserves reached the equivalent of over 3 months of import coverage at the end of 2001. The market exchange rate has been broadly stable against the U.S. dollar and in real effective terms. Despite the deterioration in garment exports and tourism receipts in the last quarter of 2001, the current account deficit in 2001 (excluding official transfers) was smaller than previously projected (10 percent of GDP), reflecting the strong performance in the first nine months. 50.
Prudent monetary policy and fiscal discipline pursued by the
government have been successful in maintaining low inflation and stable
exchange rate and in supporting economic growth. Despite the shrinkage in
the number of banks following the introduction of the bank-restructuring
program, money supply continued to expand at a reasonable pace, as public
preference for monetary assets persisted. Liquidity of the banking sector
recorded a robust growth of 20.7 percent, out of which 4.3 percent was
contributed by local components, as compared to 1.5 percent a year
earlier. Domestic currency outside banks accelerated faster than expected
as the introduction of new bank notes and the need of the private business
to make tax payments in local currency induced higher demand for the Riel.
Foreign currency deposits, the largest component of broad money, recorded
an increase of 24%, indicating strong confidence in the banking sector and
in the economic policies of the RGC in spite of the general slowdown
globally following the September events. Credit to the private sector rose
by 4%, while government's recourse to bank financing remained negligible.
Capital and reserves of the banking system continued to rise, up by 9.6%
over last year, reflecting the banks' efforts to strengthen their capital
base in compliance with the recent requirements of the law. 51. Balance
of Payments: In
2001, Cambodia had an
overall balance of payments surplus of US$71 million. As a result, gross
foreign reserves have increased and would be sufficient to finance about
3.4 months of total imports of goods and services. The data
on external transactions for 2001 show that deficit on
current account (excluding official transfers) contracted by 13.5% to
US$219.4 million, and represented 6% of GDP. The main contributing factors
were declines in deficit on both trade balance (14 percent) and income
account (18.3 percent). In 2001, the value of domestic exports amounted to
US$1,198.8 million, an increase of 10% over last year. One contributing
factor was the increase of 13 percent in exports under Generalized System
of Preferences. Retained imports increased slightly, up by 5.2% in 2001.
During the same period, estimates by the Ministry of Tourism and the
Ministry Interior suggested a sustained development in the tourism sector
as passenger arrivals in Cambodia continued to rise by about 30%. This
reflected the confidence of foreign tourists in the political stability
and safety within Cambodia In
2001, receipts of official transfers were estimated to be US $ 274
million, a slight increase of 1.1 percent relative to 2000. Foreign
investment flows were estimated to be flat at US $ 113 million due to
global economic slowdown even before the September 11 events.
Capitalization of the banking sector rose by US $ 27 million, showing the
bank’s efforts to comply with the provisions of the law concerning the
new minimum capital requirements. REVENUES 52.
Progress has been made in implementing fiscal reforms in 2001.
Following are key policy actions taken by the Ministry of Economy and
Finance in 2001 to enhance revenue collection and strengthen governance:
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TABLE 2: NATIONAL BUDGET INDICATORS |
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