Bangkok--20 Apr--Standard & Poor's
Standard & Poor's Ratings Services today said that it had assigned its 'B+' long-term and 'B' short-term foreign and local currency sovereign credit ratings on the Kingdom of Cambodia. The outlook is stable. Cambodia is the 114th sovereign rated by Standard & Poor's.
The ratings on Cambodia take into account its relatively high public and external debt, some bilateral portions of which are in arrears. Cambodia requires continued donor assistance to maintain domestic and external solvency, owing primarily to its severely constrained revenue-generating capacity, which also renders debt servicing ability vulnerable to negative shocks.
"Cambodia's general government revenue-to-GDP ratio of 12% (including grants) is only half that of the median for similarly rated sovereigns, and the lowest in the Asia-Pacific region," said Standard & Poor's credit analyst Agost Benard.
"The attendant debt-to-revenue ratio of nearly 400% indicates a high level of public leverage even for this rating category, and implies limited fiscal capacity to meet the extensive human and physical capital investment needs that are necessary to reduce poverty and create a broader economic base," Mr. Benard said. However, the extent of leverage is considerably mitigated by the concessional nature and long maturity of all of Cambodia's external debt, which comprises 95% of its total debt.
The ratings are also constrained by the country's narrow and underdeveloped economic profile and associated weak external liquidity position, reflected in trade deficits routinely in the range of 12%-15% of GDP.
These factors are balanced against a track record of strong economic growth and the underlying prudent macroeconomic policy mix, as well as the ongoing donor engagement which provides a policy anchor and underpins domestic and external liquidity.
"Real GDP growth averaging 9% over the past six years boosted per-capita GDP by 64%," Mr. Benard said. "There is reason to expect similar robust growth performance in the medium term, given the policy continuity, which focuses on export-led growth and stability in price and exchange rates."
The stable outlook assumes that economic policy direction is maintained after the 2008 elections, such that market-oriented reforms and a prudent macroeconomic setting remain in place. This in turn would help to maintain good donor relations, ensuring continued support. The outlook on the ratings could improve if there is a material rise in foreign and domestic private sector participation in the economy resulting from accelerated moves to address the multitude of investment deterrents. The outlook could also benefit if revenue-raising measures are implemented, boosting chronically low revenue collection. However, the outlook on the ratings could come under downward pressure if there is fiscal slippage, or reduced donor support due to reasons such as an adverse change in debt management strategy or deviation from prudent macroeconomic policies.
Complete ratings information is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com . All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com ; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search.
Media Contact:
David Wargin, New York (212) 438-1579
[email protected]
Analyst Contacts:
Agost Benard, Singapore (65) 6239-6347
Sani Hamid, Singapore (65) 6239-6346