Debt Sustainability Analysis (Cambodia) 2018 Asian Regional Public Debt Management Forum 13-15 June 2018, Samui, Thailand DUN Bonita Office of Debt Analysis Department of Debt Management General Department of International Cooperation and Debt Management Ministry of Economy and Finance Kingdom of Cambodia 1
Outline 1 2 3 4 5 6 Legal Framework Institutional Structure Public Debt Overview DSA Exercise Revised LIC DSF Key Takeaway 2
1. Legal Framework Law Law on Public Financial System Law on Government Securities Law on Annual Budget Subdecree Sub-decree on Public Debt Management Article 30 of the Sub-decree orders the Ministry of Economy and Finance (MEF) to conduct a debt sustainability analysis (DSA) every two years and update as necessary. 3
2. Institutional Structure Ministry of Economy and Finance GD International Cooperation & Debt Management (GDICDM) Other 11 GDs, 1 GI, & 1 GS Dept. Debt Management Dept. General Affairs Dept. Multilateral Cooperation Dept. Bilateral Cooperation Office of Debt Analysis Middle Office Office of Multilateral Cooperation 1 Office of Bilateral Cooperation 1 Office of Debt Servicing Back Office Office of Multilateral Cooperation 2 Office of Bilateral Cooperation 2 Office of Administration & Information Technology Front Office 4
Cambodia Public Debt Overview Outstanding as of 2017 0.04% 99.96% Domestic External External Debt by Creditor 9% 19% 11% 2% 5% 55% Paris Club Non-Paris Club Old Debts ADB WB Other Multilaterals Total Outstanding: USD 6673.62 Indicator 2016 2017 Share of Foreign Currency in Total Public Debt 99.95% 99.96% Average Time to Maturity - "ATM" (Year) 10.46 10.29 Weighted Average Interest Rate 1.08% 0.65% Weighted Average Maturity (Year) 28.81 32.94 Weighted Average Grace Period (Year) 8.50 9.30 External Debt by Currency 3% 15% 44% 4% 5% Others CNY JPY KRW SDR USD Weighted Average Grant Element 48.32% 54.97% 28% 5
3. DSA Exercise NSDP/PIP Cambodia s vision 2020 DMFAS Macro data from GDP Other data from IMF Key Inputs DSA Baseline scenario Stress test & Customized scenario Alternative (borrowing) scenario Debt Strategy Risk monitoring indicators Borrowing limit Annual Budget Law Annual debt ceiling Key Outputs 6
4.1. Borrowing Scenario 2015: SDR 600 million 2016-2018: SDR 700 million - 800 million p.a. 2019-2035: SDR 800 million - 1,100 million p.a 7
4.2. Key Macro Indicators Baseline Scenario - GDP Growth 7% in average - Revenue (% of GDP) Average growth: 2014-18: 0.5% (15.18% to 17.35%) 2019-34: 0.2% - 0.4% (17.75% to 20.30%) - Exports Average growth 10% of GDP - Exchange rate KHR 4,050 KHR 4,200 per USD Customized Scenario: GDP & Revenue declines - GDP Growth (in average) - Revenue (% of GDP) 2014-18: 7% 2019-22: 6% 2023-34: 5% Average growth: 2014-18: 0.5% (15.18% to 17.35%) 2019-34: 0.1% - 0.3% (17.65% to 19.00%) 8
4.3. CPIA & Threshold ADB WB & IMF Year (CPA) (CPIA) 2005 3.6 3.1 2006 3.8 3.2 2007 3.8 3.2 2008 3.6 3.3 2009 3.8 3.3 2010 3.9 3.4 2011 3.9 3.4 2012 4.0 3.4 2013 3.9 3.4 2014 4.1 3.4 2015 4.2 3.4 2016 4.1 3.4 Debt Indicator Low CPIA 3.25 PV of external debt Threshold Moderate High 3.25 CPIA 3.75 CPIA 3.75 % of GDP 30 40 50 % of Exports 100 150 200 % of Revenues 200 250 300 Debt Service % of Exports 15 20 25 % of Revenues 18 20 22 Source: Asian Development Bank, World Bank & International Monetary Fund 9
4.4. DSA Result a. PV of debt-to-gdp 45 40 35 30 25 20 15 10 5 0 2015 2020 2025 2030 2035 b. PV of debt-to-exports 160 140 120 100 80 60 40 20 0 2015 2020 2025 2030 2035 c. PV of debt-to-revenue 300 250 200 150 100 50 0 2015 2020 2025 2030 2035 25 20 d. Debt service-to-exports 25 20 e. Debt service-to-revenue Baseline Historical scenario 15 15 Customized Scenario 10 10 Most extreme shock 5 5 Threshold 0 2015 2020 2025 2030 2035 0 2015 2020 2025 2030 2035 10
4.5. Conclusion Cambodia s public debt is sustainable and remains at low risk of debt distress Annual borrowing limit for 2015 at SDR 600 million and for 2016-2018 between SDR 700 million - 800 million Maintaining macroeconomic stability Maintaining concessionality of new loans Monitoring and managing contingent liabilities 11
5. Revised LIC DFS Training: Yokohama, Japan in April 2018 Understanding the revised tools CI and Thresholds Stress Test Realism Tool Risk Rating: risk signal and judgement Moderate Risk and Market Module Data Preparation Next Step: DSA Exercise 12
5.1. CI and Thresholds Indicators Current CPIA 3.25 Weak Medium Strong Revision CI 2.69 Current Revision Current CPIA 3.75 Revision CI 3.05 PV of debt-to-gdp 30 30 40 40 50 55 PV of debt-to-exports 100 140 150 180 200 240 PV of debt-to-revenue 200-250 - 300 - Debt service-to-revenue 18 14 20 18 22 23 Debt service-to-exports 15 10 20 15 25 21 13
6. Key Takeaway Data preparation Validation Projection Coordination between related parties Data Policy & Rules and Regulations Capacity building DSA template Excel 14
Thank you! 15