Cambodia Can Achieve SDGs, But Deep Fiscal Reform Needed: ADB Report

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Cambodia has a good chance of achieving its social protection agenda under the Sustainable Development Goals (SDGs) but will need to balance different social protection investments, according to a report published on Wednesday by the Asian Development Bank (ADB).

Asian Development Bank (ADB) President Takehiko Nakao gestures at the entrance of ADB headquarters in Mandaluyong, Metro Manila after a forum with members of the Foreign Correspondents Association of the Philippines January 8, 2016. REUTERS/Erik De Castro

With the right fiscal reforms and policies in place, the Kingdom, alongside other fifteen Asia-Pacific countries in the study, can meet their social protection agenda, ADB said in its report ‘Asia’s Fiscal Challenge: Financing the Social Protection Agenda of the Sustainable Development Goals’.

The report examines the fiscal situation of the 16 countries and the challenges in building and expanding their social welfare programmes.

Of these countries, seven have about 20 percent of their population living below the national poverty line, highlighting the need to improve social protection efforts.

“Many countries still face considerable challenges in creating the sustainable financing needed for their social welfare programme, the bedrock for the success of the social protection agenda under the SDGs,” said Woochong Um, director general of ADB’s sustainable development and climate change department.

The social protection agenda under the SDGs has four dimensions – the provision of cash transfers for income security, health services, education services, and other essential goods and services.

The report found six countries need to open up new fiscal space – India, Indonesia, Kazakhstan, Nepal, the Philippines, and Sri Lanka – to meet minimum requirements to fund social protection investments.

Azerbaijan, Malaysia, Mongolia, China, Thailand, and Vietnam, meanwhile, should be able to meet the social protection agenda within the limit of their current fiscal deficit.

“Only Cambodia, Laos, Myanmar, and Timor-Leste will have to make trade-offs among the different social protection investments given their fiscal constraints,” the report said.

Some of the potential sources of revenue mobilisation for these countries, according to the study, include increasing tax efforts, reallocating energy subsidies, and reallocating natural resource taxes.

Sri Wening Handayani, ADB principal social development specialist, said, “The majority of the countries in the study will have to revamp their policies and open new fiscal space, while some exhibit capability in using existing resources to increase their revenues without dramatically increasing tax rates or introducing new taxes.”

The report recommends governments, civil society, and other development partners to immediately start long-term fiscal and financial planning for implementing the social protection agenda.

Countries should also create national policy dialogues in designing national social protection systems, conduct budget and revenue reviews, and support capacity building for social protection planning, administration, and implementation.

In November last year, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Cambodia. The IMF praised Cambodia’s continued robust growth performance and low inflation as well as the progress made in poverty reduction.

IMF also encouraged the authorities to take advantage of the current strong economic environment to intensify policies and structural reforms to enhance the economy’s resilience, safeguard fiscal sustainability and financial stability, address governance vulnerabilities, and support inclusive growth.

“Directors welcomed the authorities’ plans to restrain current spending and raise revenues. They supported the new Revenue Mobilisation Strategy, which should focus on increasing revenues by modernising revenue administration and reforming tax policies to improve their efficiency and equity,” said the report.

“To help support growth and sustainable development, it will be important to re-orient the composition of public spending towards priority infrastructure investment, and health and education spending.

“Directors considered that public wage increases should better balance pay incentives and fiscal sustainability,” the IMF added.

This article was originally published in the Khmer times.