IMF warns global downturn poses risks for Cambodia

WASHINGTON, The International Monetary Fund on Tuesday warned that Cambodia faces "serious challenges" from the impact from the global economic downturn and financial crisis, which would significantly slow its growth in 2009.

In its annual review of Cambodia, the IMF said the crisis will potentially affect economic activity, capital inflows and the banking system in the southeast Asian country.

The fund suggested that any response by Cambodia should involve supportive fiscal and monetary policies, as well as improvements in financial sector oversight, public services delivery and competitiveness.

It said plans to ease fiscal policy in 2009 were "broadly appropriate" and recommended that the increase in government spending target social and infrastructure projects.

Turning to monetary policy, the IMF said it saw room for a moderate easing in interest rates as credit growth declined and demand pressures abate.

The IMF also called for greater exchange rate flexibility, calling it "the appropriate medium-term objective." (Reporting by Lesley Wroughton; Editing by Leslie Adler)