The World Bank's Board of Executive Directors on Friday approved a US$275 million loan to support Cambodia's efforts to promote long-term economic growth and resilience.
The financing, from the International Development Association's low-interest funds for developing countries, will support reforms that enhance the competitiveness of the private sector, strengthen the country's fiscal position, and provide assistance to the most vulnerable.
The loan for the second Cambodia Growth and Resilience Development Policy Financing Project addresses challenges hampering the country's efforts to shake off the lingering economic effects of the COIVD-19 pandemic. It builds on the first US$274 million Cambodia Growth and Resilience Development Policy Financing, which was approved in 2022.
"While Cambodia's economy has recovered from the effects of the COVID-19 pandemic and subsequent shocks, the focus is now shifting to achieving sustainable, high-quality growth," said Maryam Salim, World Bank Country Manager for Cambodia.
"This new operation will enhance the competitiveness of the private sector, strengthen the government's fiscal position, and provide support to the most vulnerable Cambodians."
The COVID-19 pandemic led to Cambodia's first economic contraction in 25 years, one of the most severe in East Asia. The economy has since recovered, but growth has not returned to pre-pandemic levels.
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 firm formation and competition. Cambodia's highly concentrated economy - in terms of products, export markets and sources of finance - exposes it to shocks. The country is also highly vulnerable to the impacts of climate change, particularly floods and droughts.
The new operation will support reforms to address these challenges. Some will help create an environment in which firms can enter, exit and compete fairly. Others will enhance fiscal resilience by improving expenditure efficiency, mitigating the risks of investments and public-private partnerships, while strengthening the government's ability to raise financing through sovereign bonds.
The operation will also facilitate the timely provision of assistance to a wider range of vulnerable households in the event of natural disasters or economic shocks, improve environmental regulation and strengthen disaster risk management.
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