Chapter 1

Understanding Cambodias National Budget 2006

Lecturer: YIN SOKHENG, Master in Finance

What is a National Budget?

Cambodia's national budget is both a plan for fund raising, and a spending plan to ensure funds are used effectively for the benefit of the Cambodian people. This plan is made by the Royal Government of Cambodia and adopted by the National Assembly and the Senate.

Instructed by YIN SOKHENG, Master in Finance

Domestic Revenue
Domestic revenue includes money collected by the tax department, customs department, and non-tax department of the Ministry of Economy and Finance.

Instructed by YIN SOKHENG, Master in Finance

Revenue from Direct Taxes

The direct taxes are comprised mainly of tax on salary, tax on profit, and tax on land and property. Tax officers directly receive these taxes from individuals or companies.

Instructed by YIN SOKHENG, Master in Finance

Revenue from Indirect Taxes

The indirect taxes are comprised mainly of value added taxes, and excise taxes on consumer goods and machinery, which are imported or locally produced.

Instructed by YIN SOKHENG, Master in Finance

Revenue from International Trade Taxes

International trade taxes, or "customs duties" are applied on imported and exported goods. Therefore, these taxes are directly received from importers or exporters by customs officers.

Instructed by YIN SOKHENG, Master in Finance

Non-Tax Revenue
The non-tax revenue generally includes government fees on the concessions of state properties, such as fishing lots, forestry, state owned enterprises or real estate.

Instructed by YIN SOKHENG, Master in Finance

Budget Spending
In order to provide public services to the citizen, the government expects to spend a total of KHR 3,718 billion on the salary of civil servants, general operational activities, and public investments, such as roads, schools, and hospitals, in 2006.

Instructed by YIN SOKHENG, Master in Finance

Spending on Priority Sectors

In the 2006 national budget, the four priority ministries of Education, Public Health, Agriculture, and Rural Development, have an allowance of KHR 793 billion, which corresponds to an increase of 17 percent compared with the 2005 budget. This amount is equal to 21 percent of the total national budget spending. Education represents about 56 percent of the total, followed by Public Health (33 percent). Agriculture and Rural Development together represent only 11 percent of the total spending of the priority sectors.

Instructed by YIN SOKHENG, Master in Finance

Spending on Defense and Security

The budget allocated for Defense and Security represents 13 percent of the total 2006 national budget. The National Defense represents 64 percent of the total budget allocated for Defense and Security in 2006.

Instructed by YIN SOKHENG, Master in Finance

10

Spending on Other Ministries

The budget of the Royal Palace, Senate, National Assembly, and Council of Ministers amounts to CR 168 billion and represents 5 percent of the total 2006 national budget. It was increased by 21% compared with the 2005 budget.

Instructed by YIN SOKHENG, Master in Finance

11

Spending on Public Investment

Public infrastructure, such as roads, schools, and hospitals, is critical for economic development and the well being of citizens. Cambodia still profoundly suffers from a lack of adequate public infrastructure. The budget for public investment represents 36 percent of the total national budget 2006. This budget is mostly financed by foreign donors.

Instructed by YIN SOKHENG, Master in Finance

12

Foreign Aid and External Debts

Since 1993, Cambodia has received about US$ 600 million per year in foreign aid, which is composed of grants and loans. The overall loans accrued since 1993 are estimated to amount to US$ 1 billion at the end of 2005. If we include the not-yetrecognized loans owed to the USA during 70's and Russia during 80's, the total amount of Cambodia external debts should reach almost US$ 3 billion.

Instructed by YIN SOKHENG, Master in Finance

13

Instructed by YIN SOKHENG, Master in Finance

14

Where does the money come from, and where does it go to? Public money belongs to all Cambodian citizens, and the way it is collected and spent affects their daily life.

Instructed by YIN SOKHENG, Master in Finance

15