Government and NGOs discuss on high inflation and poverty

NGO forum on Cambodia, Caritas Cambodia and Cambodian Economic Association with cooperation with other NGOs organized a haft day discussion forum on high inflation and poverty in Cambodia on 6 May, 2008 at Cambodian –Japan Corporation Center. The ministry of economy and finance, donors, economic institutions, development partners, farmers and garment workers together participated in the forum.

The main purpose of the forum is to raise awareness among NGOs and general public about the inflation issue. The community’s and civil society’s concerns and suggestions were presented to the Royal government of Cambodia and its development partners. Another aim of the forum is to further seek the commitments from the government and its development partners, donors to address the issue over the long run and in a way that can help Cambodian poor benefit from inflation through its agricultural base. If inflation turns out to affect the poor more than the rich, it is even more important that the government focuses on controlling the inflation by keeping it low and stable.

Chhith Sam Ath, executive director of NGO forum on Cambodia as one of the forum organizers said during the four weeks before the forum, the organizers of today forum have been busy discussing the issue of rising prices with a large number of groups from civil society organizations, farmers and garment workers. Following several meetings, a joint statement on inflation and poverty in Cambodia (concern and suggestions For action by practitioners and policy makers) was then produced. CSO statement (download file). Government officials, representatives from economic institutions and other development partners have presented on the causes of the increasing price, its effects on the Cambodian economy and especially on vulnerable groups in Cambodian society. Both from the government side and NGOs explained on both local and international roots of high prices of almost market goods.

The high rate of 18.7 % inflation caused the high increase price of food and other goods in the market . Food inflation began to hit the poor who is about 4.6 millions people are struggling to live with less than a dollar per day. NIS’ s publication on a monthly basic the consumer price index (CPI) for Phnom Penh reveals following the price of different foods, drinks , clothing, water , electricity , fuel, oil, medical care , etc. The price of fuel and fish has been rising rapidly in recent years while other has remained more or less stable.

Inflation is simply a general and progressive increase in price. Inflation is the tendency of prices to increase over time. The level of inflation is usually measured by monitoring the prices of a large number of goods that are purchased by a typical consumer.

Hang Chourn Naron, Secretary General, Supreme National Economic Council and Secretary General from the ministry of economy and finance recognized the recent higher level of inflation compared the inflation level of the previous years. Speaking to the forum, HE. Hang Chourn Naron explained many reasons of the increasing price mainly this 2008 high inflation. He stressed a high cost of gasoline in the world, importation growth and the decrease of Dollar currency. Regarding to the local causes, he further told the economic growth leading to high inflation, land and real estate is getting higher and higher is also attached. To mitigate the inflation, HE Hang Chourn Naron said "the government has Doubled reserve requirement for private banks from 8 percent to 16 percent". However, he kept stressing on improving more agricultural productivity as a key factor to help mitigate the inflation.

Representatives from poor farmer, workers similarly touched attention on living condition, malnutrition and education of their children. They said they start to eat less and most of their income is spent on high cost of food. Furthermore, children stop going to school because they do not afford to pay for school fees. Instead children migrate to find work outside their community; some need to looking after the cow, going to the field to get the vegetables, wood tree because of family burden. Dropping school is much affected to human resource development.

Chan Sophal, senior research manager at Cambodian Development Resource Institute of Cambodia (CDRI) and the president of Cambodian Economic Association (CEA) demonstrated many possible consequences for the poor resulting from inflation. The poor without adequate income or food stock are consuming less food, putting their nutrition status at risk in a long term. He added the poor may reduce consumption of other non-food items which are not of urgent need, such as education, but are crucial for long term human development.

Inflation affects everybody in almost every country in the world and the poor hit the most. It is an absolute fact and can not be denied. Increases in prices affect consumers directly. Every country especially developing countries should have its measure to prevent higher inflation because it really affect to the poor of its countryman. Mr. John Nelmes , from International Monetary Fund (IMF) said inflation is caused by too much money chasing to only a few goods pushing the government to take some money out of circulation. Chan Sophal, from CDRI and director of CEA presented some measure to mitigate the consequences of high inflation on the poor. The measures are divided into 3 phases, a short term, medium and long term measure.

• Participation of civil society in identification of poor households and food contribution
• The government releases its stocks of rice in September or October, 2008

• Reduce cost of production
• Increase purchase of paddy after harvest
• Micro credit generation

• Improve good investment environment in order to promote employment and income for the poor
• Re-think state land management –is it realistic to aim for 60% forest coverage while some of it has nor forest now?

From the Asian Development Bank, Mr. Mea Sophea, more than that, said the inflation is rather a threat for sustainable social and economical development. Most of the development projects include infrastructure projects; school building, water supply project, etc are interrupted. Due to high inflation, some donors have to decide to deduct scope of projects because of an extremely surplus. For instance in 2007, Caritas Cambodia signed the contract with a construction company for builkding a new Eye Hospital in Takeo province at the cost of 1 million US dollars. However, due to high inflation, the actual construction expenditure of the same hospital during the early 2008 is up to 1.6 million US dollars, 60% increases from the first budget plan.

Asian Development Bank suggested 3 important measures, one is improving money management of the state meaning to assure that all the expenditure of the government has to be done effectively and transparency and also the management resource person has to be well-trained. The second measure is to provide good environment for more private sectors, foreign investments to directly invest on Cambodian potential sectors. Thirdly, ADB suggested creating more micro credit for the people living in the community. With a small loan people can start their small business, at least to mitigate the inflation and for family survival as a whole.