As a result of improved revenue collection and prudent management of public finances, facilitated by Cambodia’s consistent economic growth between 1995 and 2019, Cambodia has been able to mitigate the negative impacts of COVID-19 and spend more in social sectors, according to the World Bank’s Public Financial Review, Cambodia: From Spending More to Spending Better. However, this upsurge in spending was driven partly by across-the-board salary increases. The average public sector wage now surpasses that of the private sector for similar jobs.
Pay rises have yet to translate into better outcomes, particularly in social sectors, the review finds. Education outcomes have improved only slightly and remain low compared to those across the region. Use of public health facilities is low, and Cambodians spend more on medical treatment than the regional average, while public service infrastructure would benefit from improvement.
“Cambodia needs to get better value from its expenditure on public services to achieve sustainable and inclusive growth in the long term,” said Maryam Salim, World Bank Country Manager for Cambodia. “This means making spending more efficient through more strategic budget management, linking salary increases to performance, and better balancing resource allocation across levels of government.”
Cambodia can structure the next phase of its public financial management reform to build the fiscal resilience needed to meet long-term spending needs and respond to climate challenges, according to the review, which the World Bank produces at the request of the Ministry of Economy and Finance. This could be achieved by strengthening the links between planning and budgeting, and between spending and performance outcomes. Improving accountability and performance assessment in the public sector and strengthening capital budget management will also contribute to greater spending efficiency.
Authorities can improve public health delivery by addressing basic quality issues in public health services, promoting the use of health facilities, and ensuring equitable access for the poor. To ensure spending on education is more efficient, authorities can strengthen processes for recruitment, deployment, and training of teachers, and by making school operating funds more responsive to the needs of each school. Improving operational efficiency, human resource management, and staff capacity across sub-national administrations will also improve the impact of public spending, the review says.