ENCOURAGING CENTRAL GOVERNMENT BUDGET TRANSPARENCY

UNCLAS PHNOM PENH 000816 SENSITIVE SIPDIS STATE FOR EAP/MLS AND EEB/IFD/OMA - B. SAUNDERS E.O. 12958: N/A TAGS: PREL EFIN EAID ECON CB SUBJECT: ENCOURAGING CENTRAL GOVERNMENT BUDGET TRANSPARENCY REF: STATE 81177 SENSITIVE BUT UNCLASSIFIED ¶1. (SBU) SUMMARY: Pol/Econ Chief October 22 delivered reftel demarche to the Ministry of Economy and Finance (MoEF),reiterating that improvements in budget transparency would be a key focus in future years. The MoEF highlighted the ministry's diligent implementation of the Public Financial Management Reform (PFMR) program as a positive development, as well as growing cooperation with the National Assembly, the Ministry of Planning and the line ministries. However, the lack of capacity to implement a transparent national budget that conforms in all respects with international standards remains a major obstacle for the Cambodian government. The MoEF acknowledged its recent agreement to receive technical assistance from a U.S. Treasury advisor on the budget, and promised to coordinate closely on developments in the national budget planning and implementation process. END SUMMARY. ¶2. (SBU) Pol/Econ Chief highlighted the concern for both budget income and expenditures, given that Cambodia takes at least two years to account for budget expenditures. Chan Sothy, Director of the MoEF Department of Investment and Cooperation, took on board the need to achieve concrete improvements in budget transparency and highlighted recent efforts in the PFMR, Phase 2, which was launched in December, 2008 for another five years. Chan observed that Cambodia had only emerged from conflict in 1998 and that the Khmer Rouge in the mid-1970s had eradicated the country's capacity to deal effectively with a national budget. Nonetheless, he asserted that the RGC was committed to budget transparency and would provide the Embassy with information about its progress. ¶3. (SBU) COMMENT: This demarche was coordinated closely with a newly arrived U.S. Treasury Officer who will be working directly with the MoEF on budget issues. We have received excellent initial cooperation from the MoEF since the technical advisor's arrival on October 19. We expect to see continued good cooperation from the MoEF in the months ahead, and an accurate report of the challenges Cambodia faces in achieving budget transparency and the iterative improvements made in reaching that goal. RODLEY