‘Down In Revenue’ - Cambodian Government Makes Budget Cuts For 2024
The Cambodian government's budget revenue in Q1 2024 was lower than expected and has forced the government to make non-personnel budget cuts on current expenditures and a USD $325 million budget freeze on specific expenditures.
Decreases in tax and customs revenue as well as slower economic growth than expected led to a circular being issued by the Ministry of Economy and Finance (MEF) in May 2024, with the following reductions and budget freezes to be implemented:
Reduction of Current Expenditures:
- Purchase of goods down 25 per cent
- Purchase of services down 25 per cent
- Meetings and per diem reduced by 15 per cent
Budget Freeze on Specific Expenditures (totaling USD $325 million in savings):
- USD $239 million from capital expenditures
- USD $49 million from the Ministry of Health reserve
- USD $37 million from general reserves
According to the Ministry of Economy and Finance (MEF), Cambodia's economy is projected to grow by 6.0 per cent in 2024, up from around 5.0 per cent in 2023. However, this 6.0 per cent growth forecast is slightly lower than the MEF's mid-2023 projection of 6.6 per cent.
Other international institutions have also issued Cambodia's 2024 growth projections. The Asian Development Bank (ADB) expects the Cambodian economy to expand by 6.0 per cent, while the International Monetary Fund (IMF) and World Bank both project a slightly higher rate of 6.1 per cent.
Despite the slightly lower MEF forecast compared to its previous projection, the latest MEF report still anticipates the Cambodian economy will grow by 6.0 per cent in 2024.
The MEF said the recovery of the tourism sector has been much slower than expected from the second half of 2023 and is expected to continue into 2024 and this decrease is anticipated to continue until the end of the year.
Given this economic trend and the Q1 2024 state budget revenue results, the ministry decided to implement these budget cuts. The current state budget revenue is expected to decrease further and may be lower than planned for 2024.
When the 2024 budget was finalised last year, the government sought to increase the expenditure on new projects such as social protection, support and facilitation of the business environment, as well as the promotion of domestic investment through incentives, exemptions or easing of corporate obligations, tax and customs and excise.