World Bank approves new financing to support Cambodia’s economic growth and resilience
World Bank approves new financing to support Cambodia’s economic growth and resilience
According to a press release issued this Friday, 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 assist the most vulnerable.
The press release added that the Second Cambodia Growth and Resilience Development Policy Financing Project credit addresses challenges holding back the country’s efforts to shake off the lingering economic effects of the Covid-19 pandemic. It builds on the $274 million first Cambodia Growth and Resilience Development Policy Financing approved in 2022.
Recognizing Cambodia’s remarkable recovery from the impacts of the COVID-19 pandemic and subsequent shocks, the World Bank’s focus is now on supporting the country in achieving sustained high-quality growth, a testament to the nation’s resilience and potential for a bright economic future.
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 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 wherefirms can enter, exit, and compete fairly. Others will enhance fiscal resilience by improving spending efficiency and 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 timely relief to a broader set of vulnerable households during natural disasters or economic shocks, improve environmental regulation, and bolster disaster risk management.
