The National Bank of Cambodia (NBC) on Friday issued a directive to all banks and financial institutions to restructure credit for loans in four priority sectors, a move lauded by the private sector.
The directive aims to maintain financial stability, support economic activity and ease the burden of debtors facing declining revenues during the ongoing Covid-19 outbreak.
The four priority sectors cited by the NBC were tourism (including food and beverage, as well as other support services), garments (including employees), construction (exclusively for first house purchasers, shops and first mortgages) and transport (especially taxi drivers and tuk-tuk drivers) and logistics.
The NBC defined “credit restructuring” as an amendment to the terms of the original credit agreement, which provides more favourable conditions for clients who are experiencing real financial difficulties.
The directive also recommends banks and financial institutions to verify that clients are struggling financially before restructuring their loans.
Cambodia Association of Travel Agents president Chhay Sivlin told The Post on Sunday that the central bank’s directive will be a key temporary solution for the Kingdom’s stalling tourism sector.
She said the Covid-19 outbreak had completely depleted most tourism companies’ revenue, with many closing due to a lack of funds to support their operations.
“The credit restructuring directive will contribute much to the tourism industry by sustaining the tourism services sector, as well as helping those in the sector pay back financial institutions until everything gets better,” she said.
Last year, Cambodia earned $4.91 billion in international tourism revenue and $500 million in domestic tourism, data from the Ministry of Tourism shows.
Cambodia Freight Forwarders Association president Sin Chanthy said the NBC’s directive is good news for the transport sector, which has been heavily affected by a number of border restrictions around the world amid the outbreak.
“I welcome the NBC move, but we all have to work with the private banks, so I do not know how they will proceed with the work,” he said.
Emerging Markets Consulting senior adviser Ngeth Chou on Saturday lauded the NBC’s directive, though he encouraged the central bank to cover all sectors.
“NBC should expand the scope of its directive to cover other areas. The Covid-19 outbreak has had a negative impact on almost all areas.
“I believe that if the spread of Covid-19 continues, the government may need to seek deeper intervention,” he said via social media.
Shin Chang-moo, the president of South Korean-owned Phnom Penh Commercial Bank Plc, said the NBC is working very effectively and efficiently to simultaneously safeguard both the damaged industries and the banking sector.
“I am sure that all the banks are doing their best to help as many businesses as possible in various sectors depending on their own capacity,” he said.
Late last month, the government unveiled an emergency tax moratorium of four months for hotels and guesthouses in Siem Reap province.
On March 24, the Ministry of Economy and Finance issued a prakas to waive 50 per cent to 100 per cent tax on the textile industry for six months as a means of easing its financial burden.
The companies must produce documents that show actual impact on their income due to the partial suspension of the Everything But Arms (EBA) scheme when submitting their tax declaration forms, the prakas stated.