ADB gives $10 mln for Cambodia to improve public financial management

PHNOM PENH, The Asian Development Bank is (ADB) providing 10.81 million U.S. dollars to support efforts by Cambodia to improve its public financial management to ensure thatmuch-needed government funds reach the rural poor, said an ADB press release here on Thursday.

The program consists of a 6.71 million U.S. dollars of grant for the first of two sub-programs that will strengthen public financial management (PFM) reforms in the three ministries supporting rural development, namely the Ministry of Rural Development, the Ministry of Agriculture, Forestry and Fisheries, and the Ministry of Water Resources and Meteorology, it said.

Another 4.1 million U.S. dollars of grant will fund an institutional and capacity development project under the program.

The two grants will focus on improving the capacity of the three ministries in PFM subsystems relating to budget formulation,execution, procurement, and reporting; and internal audit for better service delivery to rural communities.

The two grants support Cambodia's Public Financial Management Reform Program, which was launched in December 2004 by the Ministry of Economy and Finance to address weaknesses in the public financial management system, according to the release.

While the benefits of recent growth have been widely spread across Cambodia, the rural poverty rate has not declined as expected. The poverty rate in rural areas was estimated at 39 percent in 2004 compared with the national rate of 34 percent.

With an estimated 80 percent of the population living outside the main urban centers, this translates to more than 4 million people living below the poverty line in rural areas, said the release.

Poverty reduction is severely hampered by the limited effectiveness of public spending due to the weak link between policy and the budget.

"The ministries that support rural development in Cambodia are currently the weakest and most underfunded of all the ministries. As a result, service delivery in rural areas is slow and the ruralpoor do not have many economic opportunities," Prasanna Kumar Jena, Governance Specialist of ADB's Southeast Asia Department, was quoted as saying.

A strong public financial management system will help the government implement its National Strategic Development Plan, which aims to reduce poverty, particularly through policy and financial support to the agricultural sector, which employs an estimated 70 percent of the rural population and accounts for a third of gross domestic product, said the release.

The capacity development needs of the government's National Audit Authority will also be taken into account by the program to improve the overall governance framework of Cambodia's public sector, it added.