(SANITIZED) CAMBODIA'S FIANCIAL PROSPECTS FOR 1971

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001700010036-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 16
• Document Creation Date: December 22, 2016
• Document Release Date: May 18, 2010
• Sequence Number: 36
• Publication Date: May 1, 1971
• Content Type: IM

Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
?._-/ .' . - - v- -U - / r -
Secret
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
Cambodia's Financial Prospects For 1971
JJH
DO NUT '~ Si RO?
Secret
ER IM 71-85
May 1971
Copy No.
Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
WARNING
This document contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law,
oROl 1
%XCLCOCD FROM AUTOMM:IC
OOWNO II AOI!'O ANII
Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
SECRET
CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
May 1971
INTELLIGENCE MEMORANDUM
CAMBODIA'S FINANCIAL PROSPECTS FOR 1971
Introduction
1. The findings of a recent International Monetary Fund (IMF)
mission are very pessimistic regarding Cambodia's prospective financial
position. The mission estimates that because of lags in deliveries of imports
financed by US AID, the government's 1971 budget deficit may be far
in excess of the 6.0 billion riels officially projected. The IMF mission,
however, did not concern itself with the details of the Government of
Cambodia (GKR) budget and did not address itself to the question of
military expenditures, the principal source of the projected deficit.
2. In a previous analysis of the GKR's 1970 wartime budget
projections, we found that expenditures were substantially overstated,
largely because of inflated military personnel costs. This memorandum
examines the GKR's 1971 budget projections, particularly military
allocations; adjusts official estimates of the budget deficit accordingly; and
estimates the net effect of the adjusted expenditures on liquidity in 1971
under alternative assumptions concerning the amount of deliveries of US
AID commodities. The other major influences on Cambodia's financial
situation - the likely size and composition of exports and imports - also
are evaluated.
Summary
3. Cambodian projections of budget expenditures in 1971 appear
to be substantially overstated largely because of inflated estimates of average
military personnel costs. By employing a more realistic cost factor, estimates
Note: This memorandum was prepared by the Officc of Economic
Research.
SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
of military expenditures are reduced by 2.5 billion riels, or some 13%.
Further reductions may result from the current campaign to verify military
payrolls. Projected civil expenditures remain at prewar levels despite
substantial losses of population and territory under government control;
political considerations presumably prevent a reduction.
4. Counterpart receipts from the sale of US AID commodities also
appear to be seriously overstated. Of the $78.5 million in US economic
aid obligated to Cambodia for US fiscal year (FY) 1971, only a very small
portion has actually arrived. By the end of calendar year (CY) 1971, actual
US aid deliveries could amount to between $30 million and $60 million
but almost certainly will be less than the $70 million anticipated in the
official import plan. The GKR has insufficient foreign exchange reserves
to make up for the probable shortfall in US AID deliveries. Reserves have
fallen from about $60 million at the end of December to about $50 million
by the end of March, and further drawdowns will be necessary to finance
certain critical items ineligible for AID financing. Export earnings are
expected to amount to only $14.3 million, compared with average annual
earnings of $80 million in 1965-69. Consequently, imports in 1971 are likely
to fall short of the planned goal by a substantial margin.
5. Since overstatements of both expenditures and revenues tend to
compensate for each other, the official projection of the budget deficit -
6.0 billion riels - does not appear to be far off the mark. With the deflated
projections of military personnel costs, we estimate that the GKR budget
deficit for 1971 could be held to between 4.3 billion and 6.8 billion riels,
depending upon US AID deliveries.
6. Because the rate of government expenditures is likely to level
off, payments arrears should stop growing and the cash deficit probably
will not be much different from the accounting deficit in 1971. We estimate
that currency in circulation will increase by 34% to 55% during 1971. With
the money supply continuing to expand at rapid rates, upward pressure
on prices is bound to increase. In the coming months, the fragile confidence
in the economy that so far has prevented hyperinflation could easily be
shaken. Depleted stocks, delays in US assistance, and insecure lines of
communication will probably hold down supplies of goods at a time when
monetary demand is booming.
1 SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
SECRET
Discussion
Exports
7. Cambodia's export earnings are officially projected at only $14.3
million for 19711, compared with average annual earnings of $80 million
in the period 1965-69. Despite a large rice surplus -- perhaps as much as
200,000 tons - from the harvest just completed and at least 150,000 tons
of exportable rice left over from last year's harvest, transport problems
are expected to limit rice exports to soma 120,000 tons, valued at $7.3
million. Production of rubber, normally Cambodia's second largest foreign
exchange earner, was halted in mid-1970 because of enemy occupation of
the plantations and extensive damage to processing facilities. Production
is not expected to resume in the foreseeable future - a considerable loss
to Cambodia's economy. Livestock ($1.1 million), corn ($1.0 million), and
kapok ($0.6 million) are expected to constitute the bulk of remaining
exports. The export plan, drawn up prior to the March 1971 attack on
the oil refinery, included $0.8 million in fuel oil and naphtha exports, which
will not be realized. Since there is some possibility of an agreement with
the Government of South Vietnam whereby rubber plantations in friendly
hands, such as the Krek plantation, could resume production of raw latex
for shipment to South Vietnam for processing, and since hopes that
Battambang rice might be shipped via Thailand have been revived in recent
weeks, export earnings substantially in excess of $15 million are possible.
Nevertheless, it is far too early to adjust official projections upward.
Imports
8. For 1971 the GKR plans imports at $91 million, somewhat less
than prewar levels (imports amounted to $104 million in 1968 and $96
million in 1969). The fact that a significant portion of Cambodia's industry
either has been damaged or has fallen into enemy hands raises requirements
for certain goods, such as fertilizer, cement, paper, and refined petroleum.
Increased imports of tires may also be necessary because production at the
state-owned tire factory (SONAPNEU) may soon be halted for lack of
rubber. On the other hand, planned imports for 1971 are more than double
the level actually achieved in 1970.
9. The broad categories employed in available import data cannot
readily be classified in terms of final uses of the imports. Rough calculations
suggest, however, that capital goods imports are to increase more than
consumer goods imports, as shown below.
SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
0 SECRET
1971
Current'Plan
1970
11-Month Imports
1970
Prewar Plan
Million Per-
Million
Per-
Million
Per-
US $ cent
US $
cent
US $
cent
Total imports
90.8 100
35.5
100
66.7
100
Consumer-oriented
52.7 58
23.9
67
43.4
65
Industrial/
32.0 35
9.6
27
21.1
32
capital-oriented
Uncategorized
6.1 7
2.0
6
2.2
3
10. The following tabulation shows the sharp increases planned for
a few selected categories of capital goods.
Million US $
1971
Current
Plan
1970
11-Month
Imports
1970
Prewar
Plan
Industrial machinery
5.4
0.9
1.1
Electrical equipment
4.1
1.0
1.3
Cement
1.8
0.5
1.5
Steel
8.1
1.8
7.2
Construction-related
5.0
2.8
3.1
Planned imports of $5.4 million in industrial machinery and $4.1 million
in electrical equipment, compared with last year's imports of $0.9 million
and $1.0 million, respectively, are particularly difficult to explain in the
present economic climate. Much of the $15 million in planned imports of
cement, steel, and construction machinery, however, will probably be used
to rebuild roads, bridges, and other infrastructure. Planned cement imports
reflect the need to replace stockpiles in Phnom Penh. Although a six-month
stockpile of cement is said to be on hand at Cambodia's Chakrey Ting
plant, it is cut off from the capital by enemy interdictions to Route 3.
Reports that a sharp decline in construction activity had left a stockpile
1 SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
SECRET
of reinforcing bars in Phnom Penh lead us to speculate that some portion
of planned steel imports probably will consist of barbed wire, heavy wire
mesh, and other steel products required by the military.
11. A comparison in the accompanying tabulation of planned imports
of selected consumer goods in 1971 with levels planned and achieved in
1970 also reveals some large increases.
Million US $
1971
1970
1970
Current
Plan
11-Month
Imports
Prewar
Plan
Food
7.2
0
8
N.A.
Tobacco
3.6
'
N.A.
Cotton fiber
8.
1.0
1.3
and yarn
Motor vehicles
7.2
1.1
Motorcycles
3.6
0.6
0.2
Bicycles
0.5
0.2
Pharmaceuticals
7.6
4.7
6.3
Petroleum
7.8
7.1
11.2
12. A very large increase in food and tobacco imports is anticipated.
Food imports are to consist largely of milk powder, sugar, and wheat flour,
stocks of which were reduced drastically in 1970, and demand for which
has been raised by the expansion of the population and the armed forces.
Demand for tobacco products will increase for like reasons. Cambodia
normally imports small quantities of tobacco - about 50 tons annually -
for blending with locally grown varieties and, in fact, was a net exporter
of tobacco products before the war. Current stocks are low, however, and
heavy military action in the tobacco-growing regions of Kompong Cham
will probably cut production.
13. The import plan makes no provision for cotton cloth and finished
fabrics. Development of the local textile industry caused imports of cotton
cloth to decrease from $8.2 million in 1965 to less than $1 million in
1969. Finished textiles are subject to prohibitively high protective tariffs,
but certain kinds, such as mosquito netting, knitwear, and carpets, are
SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
SECRET
eligible for importation under "compensated exchange," a system whereby
official holdings of foreign exchange are not affected. 1/
14. Planned cotton fiber and yarn imports amount to $8.1 million.
The sharp increase over the 1970 level is the result of a very poor cotton
crop, coupled with an increased demand for locally produced textiles.
Cambodia's state-owned textile factories at Battambang and Kompong
Chaco have been operating with three shifts in order to meet requirements
for military uniforms.
15. Shortages brought about by military confiscation of trucks, buses,
and cars during 1970 are largely responsible for projected vehicle imports
of $11 million. Included in this total, however, are $3.6 million for
motorcycles, reflecting an anticipated increased demand for such luxuries.
16. Imports in 1971, however, are not likely to reach the planned
level of $91 million. The actual volume will depend upon several factors,
including the level of exports, the composition of the US Military Assistance
Program, particularly the unobligated portion of the $20 million allocated
for economic-related commodities, and the level of third-country assistance.
The dominant factor will be the rate at which US AID commodities are
delivered. Of the $78.5 million in US economic aid obligated to Cambodia
for US FY 1971, only a very small amount - composed entirely of
petroleum products - has actually arrived. No delivery has been made on
that portion to be financed under PL 480 ($8.5 million), and none is
expected before June. By the end of CY 1971, actual US AID deliveries
could amount to between $30 million and $60 million, but will almost
certainly be less than the $70 million anticipated in the official import
plan.
17. Expectations of a substantial shortfall in US AID deliveries for
CY 1971 are due, on the US side, to delays in setting up from scratch
an aid program for a country with which diplomatic relations have only
recently been established and, on the Cambodian side, to what appear to
be unusual administrative deficiencies. Under the $20 million reimbursable
grant portion of US AID obligations, the Cambodians reportedly have had
great difficulties in complying with US AID procedural requirements.
Clandestine sources also report that during the absence from Cambodia of
Ly Kim Heng, head of SONEXIM (the organization handling all US AID
imports) much infighting took place within the organization for positions
of influence regarding the distribution of AID goods, with relatively little
progress being indicated in the placing of import orders.
1. Under this system, a portion of earnings from the export of certain
commodities may be retained and used to finance imports from an approved
list of items.
SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
M SECRET
18. The GKR has insufficient foreign exchange reserves to make up
for the probable shortfall in US AID deliveries. Requirements for debt
servicing and replacement of depleted stocks of imported goods have caused
reserves to decline from about $60 million at the end of December to about
$50 million by the end of March. Further drawdowns will be necessary
to finance critical items, such as certain pharmaceuticals, chemicals, and
plastics, that art, ineligible for AID financing. Commodities originating in
developed countries other than the US are also ineligible under present
arrangements. Since Japan and France accounted for about half of
Cambodia's imports during 1966-69, it appears that, at a minimum,
Cambodia will be required to use some of its own foreign exchange for
imports of spare parts. Moreover, AID reimbursement procedures will have
a significant negative effect on GKR reserves at least for several months.
For the reimbursable grant portion of the US AID program ($20 million),
the GKR must temporarily use its own foreign exchange to import eligible
items. Since Cambodia as yet has no line of credit with foreign banks,
reserves are drawn down when an order is placed, while reimbursement
is not effected until the goods are delivered. Furthermore, government
reserve policy has been extremely cautious and is likely to become even
more so as reserve drawdowns are more closely watched by the business
community. Last year's prewar plan calling for only $67 million in imports,
for example, reflected a considerable amount of belt-tightening caused by
extremely poor export earnings in 1969. J Even this relatively frugal
import plan was abandoned, however, when exports again were severely
curtailed, this time due to disruptions caused by the war. Actual imports
in 1970 amounted to only $37.5 million, or 39% of 1969 imports.
GKR Military Budget for 1971
19. The new GKR budget recently approved by the Council of
Ministers calls for total expenditures in 1971 of 18.7 billion riels ($337
million), of which 11.5 billion riels, or 62%, are allocated to the Ministry
of Defense. The budget has now been submitted to the National Assembly,
where it is expected to be approved substantially in its present form.
20. The defense appropriation allocated 10.5 billion riels ($189
million) for personnel costs. For a projected force level of 220,000 for
all of V171, per capita personnel costs would come to 48,000 riels ($865),
approximately the same cost factor implicit in the last peacetime budget -
for 1969 - and only slightly lower than that used in the mid-year
projections for the second half of 1970. While a per capita cost factor
of 48,000 riels may have been appropriate for a mature peacetime army
2. Cambodia had an exceptionally poor rice harvest in 1969 and actually
had to import rice before the end of the year.
SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
.SECRET
composed largely of professional soldiers whose pay and allowances were
well above minimuin levels, it substantially overstates average personnel costs
for a force composed largely of new recruits, without dependents, whose
basic annual salary and allowances would approximate 24,000 riels.
21. In an earlier analysis of the GKR's midyear 1970 budget, J we
derived more reasonable cost estimates by applying an annual cost factor
of 48,000 riels per man only to the first 35,000 men (the approximate
size of the prewar army) and by evaluating average yearly costs for the
remaining troops on the army payroll at 35,000 riels per man. On this
basis, personnel expenditures for 1970 were estimated at 4.2 billion
riels (for a force averaging 107,000 men for 1970) as oppos^d to the GKR's
midyear estimate of over 5 billion riels for the second half of 1970 only (see
Table 1). Actual budget expenditures for 1970 are not yet available, but
the fact that the latest GKR budget revision shows military personnel costs
of 4.9 billion riels for all of 1970 confirms that their previous projections
were indeed inflated.
22. In fact, actual 25X1
appropriations for pay and allowances in February 1971 averaged 3,022
riels per man, or about 36,264 riels per man per year. Projecting this cost
factor, annual personnel costs for a 220,000-man force in 1971 would
amount to 8.0 billio,t riels, or 2.5 billion riels less than the current
allocation (see Table 2). Although this projection contains no allowance
for maturation of the grade structure in the course of the year, that factor
probably will be more than offset by a shortfall in the average force level,
such a shortfall that 218,000 were on the 25X1
payroll in mid-February and that a reduction to 210,000 was targeted for
March.
3. For a comparison of the GKR midyear budget projections, the CIA
adjustments to it, the GK2's revised 1970 budget, and its 1971 projections,
see Table 1.
SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
SECRET
24. The balance of the 1971 military budget, I billion riels ($18
million), has been allocated for materiel. Although this allocation is
equivalent to iess than 10% of personnel costs -- the normal peacetime
ratio - and (according to the most recent budget revision) is even lower
than materiel expenditures for last year, it should prove adequate in view
of expected deliveries of over $200 million in US military assistance to
Cambodia during the next 12 months.
Civilian Expenditures
25. Civilian expenditures have remained extremely stable, despite the
war. In the GKR's mid-1970 budget revision, civilian expenditures were
projected at 6.2 billion riels, not including supplemental funds of 1.3 billion
riels specifically allocated to cover civilian needs brought about by the war,
such as repair of roads, bridges, and railroad and telecommunications lines.
Since it appeared that little in the way of repairs was actuary being
undertaken at the time, we estimated that only 100 million riels would
actually be expended. Although a breakdown of civilian expenditures in
the yearend budget is not available, it appears that this estimate was too
low (see Table 1).
26. While it was recognized that substantial losses of territory and
of population under government control should logically reduce
requirements for the civilian budget, no significant adjustments were made
to the midyear projection in arriving at new estimates, primarily because
we considered it politically infeasible for the GKR to make parallel
reductions in the civil service. in retrospect, this seems to have been the
case. A comparison of ministerial allocations in the revised budget with
those made prior to Sihanouk's ouster reveal virtually no effort to trim
civil expenditures. For example, funds for education were not cut, despite
the large number of students entering the military. Allocations for tourism
and public: works were reduced by less than 10%.
27. The government now projects civilian expenditures for 1971 at
7.2 billion riels, or at about the 1970 level. Since cuts in civilian
expenditures would be no less politically sensitive this year than last, no
adjustments were made to the official projections (see Table 2). A detailed
breakdown is available only for the original draft as submitted to the
Cabinet, which called for civilian expenditures of 7.8 billion riels, including
substantial increases for the Ministries of Education, Public Works, and
Interior. It is not known wherein the Cabinet effected its reduction of 600
million riels.
- 9 -
SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
SECRET
28. To some extent, civilian expenditures are used for military
purposes. In many instances, individuals are serving i i the military while
continuing to receive pay from state agencies, organizations, and enterprises
in which they were formerly employed.'
Recei is
29. Revenues for 1970, according to the government's latest budget
revision, amounted to 4.7 billion riels (see Table I and Footnote d), slightly
above the midyear estimates despite the fact that imports were some $7
million below midyear projections. Although no details are available, it
appears the Cambodians were more successful at collecting taxes than had
been anticipated.
30. The GKR estimates total 1971 revenues at 12.7 billion riels, based
on counterpart receipts from US AID commodities of 5.8 billion riels ($70
million converted at 83 riels per US $1). However, actual counterpart
receipts in 1971 will probably amount to between 2.5 billion and 5.0 billion
riels (see Table 2) because of expected delays in AID deliveries. Projections
of revenues assume implementation of proposed rate increases of up to
50% in certain turnover, sales, and amusement taxes. If the proposals are
not accepted, 1971 revenue estimates would have to be reduced by about
1.3 billion riels.
Budget Deficit
31. With the deflated projections of military personnel costs, we
estimate that the GKR budget deficit for 1971 could be held between 4.3
billion and 6.8 billion riels. 4f The deficit would approach the lower or
higher end of the range, depending upon whether US AID deliveries were
closer to $60 million or $30 million, respectively. If military personnel costs
were as high as planned, however, the deficit would be substantially larger.
Under the most pessimistic assumption about AID deliveries - that is, only
$30 million - the budget deficit could reach 9.3 billion riels.
4. Net changes in liquidity and budget deficits under various sets of
assumptions regarding military expenditures and the level of US AID
deliveries are projected in Table 2.
- 10 -
SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
SECRET
32. Monetary data reveal that the actual cash deficit ran well behind
budgeted deficits in 1970. The actual cash deficit is estimated at about
5.4 billion riels for the year, leaving some 3.7 billion riels of 1970 obligations
to be financed in 1971. In 1971, however, the, cash deficit probably will
not be significantly below the accounting deficit and it could be larger
if the tiinelag in government outlays is reduced. Although central bank
advances to the state on a month-to-month basis have been very erratic,
they have already reached a cumulative total of 3.0 billion riels for the
first three months of 1971. Because expenditure rates will tend to even
out in the last half of the year -- provided the force level ceiling is not
exceeded - it is unlikely that the carryover of unspent funds will increase
much, if at all.
Money Supply
33. During 1970 the steady infusion of money printed to finance
the war resulted in an 88% increase in currency in circulation by the end
of the year. Currency in circulation increased an additional 15% during
the first three months of 1971, reaching 13.3 billion riels.
34. Huge monthly deficits will continue to dominate the monetary
situation in the coming months. We estimate that, by the end of 1971,
currency in circulation will have increased by 3.9 billion to 6.4 billion riels --
or 34% to 55% -- depending on deliveries of US AID goods (see Table 2).
With the money supply expanding at rapid rates, prices are bound to increase
considerably.
35. Inflation thus far ha:, been held in check by conservative spending
habits, availability of essential commodities (especially food), and, more
recently, the confidence-building influence of the commitment of US
economic assistance. Nevertheless, whatever confidence is left in the
economy is fragile at best and may be easily shaken in the coming months.
Depleted stocks, delays in US assistance, and insecure lines of
communication will pro.)ably hold down supplies of goods at a time when
monetary demand is booming. A further deterioration of the security
situation could cause severe shortages of goods, although it might also
discourage spending. On the other hand, a decline in the level of hostilities
might not ease the pressure on prices. Indeed, the experience in South
Vietnam suggests that pressure on prices would probably increase. The
velocity of money (the rate at which money changes hands) in South
Vietnam has generally decreased in times of sharp conflict and increased
in times of relative security.
S CFr.R FT
Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
. SECRET
Table 1
Cambodia: Official Budgets for 1970 and 1971 and CIA Estimates for 1970
Bi..lion Riels
1970
Midyear Proiections
1971
GKR Budget
GKR
Yearend Revision
CIA
--
GKR
Total expenditures
18.7
13.8 a/
11.9
18.2
Civilian
7.2
7.0
6.1
7.5
Personnel
3.8
3.8
Materiel
2.2
2.4
Add-on
0.1
1.3
Military
11.5
6.3
5.8
10.8
Personnel
10.5
4.9
4.2
5.3
Materiel
1.0
1.4
1.1 ,
5.5
Paramilitary
0.6
Total revenues
12.7
4.7 41
4.4
4.4
Import-related
2.3
1.5
Other
4.6
2.9
US AID counterpart
5.8
Accounting deficit
6.0
9.1 d1
7.6
16.6
Net change in liquidity
4.6
Cash deficit
5.4 J
5.4
Plus value of exports
1.7
Minus value of imports
2.5
a. Some reports have indicated total expenditures of 13.8 billion riels, but
detailed information compiled from several sources accounts for only 13.3
billion riels. The Ministry of Surface Defense, which was disbanded during
the year, was allocated 500 million riels in the original prewar budget. It
is not known whether this is the cause of the discrepancy.
b. Frojections for the second half of 1970 only. The midyear projections
made no mention of military expenditures in the first half of the year.
c. Estimated at 25% of personnel costs.
d. Embassy sources have reported total revenues for 1970 of 6.6 billion riela,
an accounting deficit of only 7.2 billion riels, and a cash deficit of only
4.0 billion riels. However, the official 25X1
budget contains an entry for 1.9 billion rieZs cal ed Racal depreciation,"
which appears to be treated in the budget as a deficit-financin item. The
reason for the discrepancy in the cash deficit is unknown. 25X1
25X1 cumulative government borrowing in 1970 as measure
central ank advances to the state amounted to 5.4 billion riels in 2970.y
e. Estimates counterpart receipts from US AID imports at or!y 5.8 billion
rieZs, that is, it assumes that only $70 million in US AID goods will be sold
locally at a previously agreed upon rate of 83 riele per US $1. (GKR's fiscal
year coincides wit', the calendar year.) Actual deliveries and the contribu-
tion to the budget from US counterpart receipts is somewhat overstated. For
more realistic assumptions, see Table 2.
f. Assumed a net foreign exchange drawdown of 15 mi,!lion riela in 1970.
- 12 -
I SECRET
Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
 Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0
Table 2 25X1
Estimated Government Expenditures and Revenues in 1971 and Net Changes in Liquidity
Billion Riels
Official Budget 1
Budget ~:;h Adjusted
Military Personnel Costs a/
Total expenditures
18.7
16.2
Civil
7.2
7.2
Milit:.ry
11.5
9.0
Materiel
i.0
1.0
C/3
M
I
Personnel
A
10.5
B
C
A
8.0
B
C
H
Total revenues
11.9
10.6
9.4
11.9
10.6
9.4
Customs
1.1
1.1
1.1
1.1
1.1
1.1
Excise
O
h
1.3
1.3
1.3
1.3
1.3
1.3
t
er
U
4.5
4.5
4.5
4.5
4.5
4.3
S AID counterpart
5.0
3.7
2.5
5.0
3.7
2.5
Net change in liquidity
6.4
7.7
8.9
3.9
5.2
3.4
Budget deficit
6.8
8.1
9.3
4.3
5.6
6.8
Plus value of exports
0.8
0.8
0.8
0.8
0.8
0.8
Minus value of non-US AID imports b/
1.2
1.2
1.2
1.2
1.2
1.2
a. With alternative assumptions of actual US AID deliveries of: A, $60 million; B, 45
million; and C, $30 million.
b. Equal to $21 million of non-US AID imports calculated at the official rate of 55.5 riels
equals US $1. The official estimate of customs duties (1.1 bil..on riels) is too large to
be based on a taxable import base of only $21 million. Apparently, the :'zmbodians intend to
attach normal duties to at least a portion of US AID goods over and above the 50% "war tax."
Declassified in Part - Sanitized Copy Approved for Release 2012/02/14: CIA-RDP85T00875R001700010036-0