WASHINGTON, June 20, 2024 – The World Bank Board of Directors today approved $275 million in credit to support Cambodia’s efforts to promote long-term economic growth and resilience. The financing, from low-interest International Development Association funds for developing countries, will promote reforms that boost private sector competitiveness, strengthen the country’s fiscal position, and provide assistance to the most vulnerable.
The credit for the Second Cambodia Growth and Resilience Development Policy Financing Project addresses challenges holding back the country’s efforts to shake off lingering economic effects of the COIVD-19 pandemic. It builds on the $274 million first Cambodia Growth and Resilience Development Policy Financing 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 led to Cambodia’s first economic contraction in 25 years, among the most pronounced in East Asia. The economy has since recovered, though growth has not returned to its pre-pandemic trend.
The situation reflects both the global economic slowdown and structural challenges to the country’s growth model. Cambodia’s structural challenges include weak productivity growth, low human capital formation, and barriers to private business formation and competition. Cambodia’s highly concentrated economy — in terms of products, export markets and financing sources — exposes it to shocks. The country is also highly vulnerable to the impacts of climate change, especially floods and drought.
The new operation supports reforms to address these challenges. These will help create an environment in which firms can enter, exit, and compete fairly. Others will enhance fiscal resilience by improving spending efficiency, mitigating the risks of capital expenditure and public-private partnerships, while strengthening the government’s capacity to raise financing through sovereign bonds.
The operation will also facilitate the timely provision of relief to a broader set of vulnerable households in the event of natural disasters or economic shocks, improve environmental regulation and bolster disaster risk management.
