VZCZCXRO4429
PP RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHPF #1023 3590933
ZNR UUUUU ZZH
P 240933Z DEC 08
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHDC PRIORITY 0237
INFO RUCNASE/ASEAN MEMBER COLLECTIVE

UNCLAS PHNOM PENH 001023 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR EAP/MLS 
 
E.O. 12958: N/A 
TAGS: PGOV ECON CB
SUBJECT: CAMBODIA'S 2009 NATIONAL BUDGET GROWS NEARLY 30 
PERCENT 
 
REF: PHNOM PENH 934 
 
SENSITIVE BUT UNCLASSIFIED 
 
¶1. (SBU) Summary:  The national budget for 2009 grew 29.6% 
over 2008, with large increases in military and security 
spending, as well as current and capital expenditures. 
However, to meet the challenges posed by slowing economic 
growth predicted for 2009, donors note the government needs 
to ensure that hard-won revenue administration gains are 
entrenched and further strengthened, and that the increased 
government spending is directed towards growth-generating 
infrastructure improvements and poverty-reducing programs. 
End Summary. 
 
¶2. (U) The Senate recently approved a 2009 budget of USD 1.88 
million, an increase of 29.6 percent over the previous year. 
The budget is now with the King for promulgation, which is 
expected later this week.  Strong economic performance and 
improvements in tax administration (tax collection has grown 
40 percent over the past three years) have resulted in an 
increase in government revenues, which are projected to rise 
to 12.5 percent of estimated GDP in 2008.  The budget deficit 
for 2008 is expected to decline to an estimated 1.75 percent, 
due to expenditures having been maintained within budget 
targets. 
 
¶3. (U) Military and security spending accounted for 11.8 
percent of the total budget for 2009, or 1.85 percent of 
estimated GDP for 2009, with military spending enjoying the 
greatest increase, up 68.8 percent.  Security spending grew 
by 56.8 percent.  A portion amounting to 21.2 percent of the 
2009 budget is allocated to social affairs, a 22.5 percent 
increase over 2008.  Economic spending also grew by 21.2 
percent from 2008, equal to 4.7 percent of the 2009 budget. 
Priority areas benefiting from increases are listed below: 
 
                                    Percentage Increase 
Ministry                            (year on year) 
--------                            ------------------- 
Information                         51.6 percent 
Council of Ministers                47.4 percent 
Labor and Vocational Training       43.4 percent 
Rural Development                   32.9 percent 
Transport and Public Works          25.6 percent 
Health                              24.5 percent 
Education                           19.4 percent 
Agriculture                         16.2 percent 
 
The budget allocation for capital expenditure amounts to 39.8 
percent of the total budget for 2009, an increase of 33.4 
percent over 2008. Capital expenditures financed by the state 
budget increased 48.8 percent. 
 
¶4. (U) Earlier this month, international development partners 
pledged USD 951 million in assistance for 2009, up from USD 
690 million in 2008.  (Note: The total amount of assistance 
is expected to top one billion when the U.S. contribution of 
approximately USD 50 million is confirmed. End Note.)  China 
pledged the most with USD 256 million in assistance and 
loans, followed by pledges by the EU and European countries 
which totaled USD 213 million.  Japanese assistance amounted 
to USD 112 million and International Financial Institutions 
pledged USD 200 million.  Assistance from eleven UN agencies, 
funds, and programs amounted to 81 million.  Of the USD 951 
million pledged in aid, an estimated USD 300 million (in 
loans) will be used to directly finance the government 
budget, primarily for infrastructure improvements. 
 
¶5. (SBU) Government revenue, measured as a share of GDP, is 
expected to decline slightly from 2008 levels due to slower 
economic growth anticipated for 2009 (reftel).  The increased 
government spending in 2009 should help to mitigate the 
slowing growth, but the decline underscores the need for 
continued improvements in revenue administration. 
Additionally, donors expressed concern during the December 
Cambodia Development and Cooperation Forum (CDCF) about the 
need for the government to prioritize and focus spending on 
productive areas, such as infrastructure improvements and 
poverty-reducing social expenditures, such as irrigation 
projects and social safety nets to protect the most 
vulnerable. 
RODLEY