The World Bank Board of Directors approved $275 million in credit to support Cambodia’s efforts to promote long-term economic growth and resilience. The financing, sourced from low-interest International Development Association funds for developing countries, aims to enhance private sector competitiveness, strengthen the country's fiscal position, and provide assistance to the most vulnerable populations.
This credit is part of the Second Cambodia Growth and Resilience Development Policy Financing Project, addressing challenges that have impeded the country's recovery from the economic effects of the COVID-19 pandemic. It builds on a previous $274 million financing initiative approved in 2022.
“While Cambodia’s economy has recovered from the impacts of the COVID-19 pandemic and subsequent shocks, the focus is now shifting toward achieving sustained high-quality growth,” said Maryam Salim, World Bank Country Manager for Cambodia. “This new operation will boost private sector competitiveness, strengthen the government’s fiscal position, provide assistance to the most vulnerable Cambodians.”
The COVID-19 pandemic resulted in Cambodia's first economic contraction in 25 years, one of the most significant downturns in East Asia. Although there has been an economic recovery, growth has not returned to its pre-pandemic trend.
Several factors contribute to this situation: a global economic slowdown and structural challenges within Cambodia's growth model. These challenges include weak productivity growth, low human capital formation, and barriers to private business formation and competition. Additionally, Cambodia's economy is highly concentrated in terms of products, export markets, and financing sources, making it susceptible to shocks. The country also faces significant vulnerability to climate change impacts such as floods and droughts.
The new operation supports reforms aimed at creating an environment where firms can enter, exit, and compete fairly. Other measures will enhance fiscal resilience by improving spending efficiency, mitigating risks associated with capital expenditure and public-private partnerships while strengthening the government's capacity to raise financing through sovereign bonds.
Furthermore, this initiative will facilitate timely relief provision to a broader set of vulnerable households during natural disasters or economic shocks. It will also improve environmental regulation and bolster disaster risk management.
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