Cambodia entered the second half of 2026 with a cautious fiscal position as government revenue continued to grow while public spending declined. Fiscal revenue increased 8.5 percent year on year during the first half of the year, while government expenditure contracted by 3.1 percent, according to the ASEAN+3 Macroeconomic Research Office (AMRO). The findings were published in AMRO’s September 2026 ASEAN+3 Quarterly Fiscal Bulletin, which reviewed fiscal developments across the regional economies.
The figures point to a government that is continuing to collect revenue while keeping spending under control, even as households and businesses face pressure from higher energy and input costs. At the same time, AMRO has called for closer coordination between fiscal and monetary authorities, particularly in managing the impact of growing government deposits on banking system liquidity. The challenge for Cambodia now is to preserve financial stability while ensuring public spending remains strong enough to support economic activity, productivity and job creation.
“Cambodia enters the second half of 2026 with a relatively cautious fiscal position, marked by stronger revenue collection, lower government spending and targeted measures to support households and businesses. While the accumulation of government deposits has strengthened the state’s financial buffer, it has also contributed to tighter liquidity conditions within the banking system. AMRO therefore sees closer coordination between fiscal and monetary authorities as increasingly important. For Cambodia, the priority is not simply to control expenditure, but to ensure that available resources are directed toward areas capable of generating productivity and employment, including infrastructure, digitalisation, education and health. Maintaining this balance could help protect financial stability while preserving the fiscal capacity needed to respond to future economic challenges.”
Revenue Continues to Grow Despite a Slower Pace
Cambodia’s fiscal revenue increased 8.5 percent during the first half of 2026 compared with the same period a year earlier. Although this represented a moderation from the 10.6 percent growth recorded during the corresponding period of fiscal 2025, revenue collection continued to expand.
Income based taxes remained relatively firm, supported by continued corporate activity. This suggests that businesses continued to contribute significantly to government revenue despite the more challenging economic environment. By the end of June, revenue execution had reached 54.2 percent of the annual budget, compared with 52.5 percent during the same period of fiscal 2025.
However, consumption based taxes were weaker. One factor was fuel related tax relief introduced by the Royal Government to reduce pressure on households and businesses facing higher energy costs. The measures show the government attempting to balance revenue collection with short term economic support.
Government Spending Contracts as Capital Investment Slows
While revenue increased, total government expenditure declined 3.1 percent year on year during the first half of 2026. Spending execution reached 39.1 percent of the annual budget, down from 44.7 percent during the same period a year earlier.
AMRO attributed much of the contraction to weaker capital spending amid implementation constraints. At the same time, primary current expenditure increased, supported by higher social benefits. The contrasting figures highlight a fiscal approach that has prioritised caution while continuing to provide targeted support where it is needed.
For Cambodia’s economy, the quality and timing of public spending will remain important. Lower expenditure can strengthen fiscal discipline, but insufficient capital spending may also limit investment in projects that improve productivity and create employment. The challenge is therefore to ensure that spending restraint does not come at the expense of important development priorities.
Government Measures Aim to Cushion Economic Pressure
Cambodia introduced several measures to reduce the impact of higher energy costs associated with the conflict in the Middle East. The Royal Government reduced fuel related excise taxes and value added tax while eliminating customs duties on fuel imports.
These measures were designed to ease pressure on households and businesses by lowering some of the costs associated with fuel. For companies, particularly those exposed to transportation, logistics, manufacturing and other fuel intensive activities, such measures can help reduce operating pressures during periods of elevated energy prices.
The government also introduced property transfer tax relief and incentives for government securities. These initiatives combine immediate economic support with longer term efforts to encourage development of Cambodia’s domestic financial market.
Rising Government Deposits Create a Liquidity Challenge
One of the more significant developments identified by AMRO was the accumulation of government deposits during the first half of 2026. Stronger revenue collection, increased domestic borrowing and restrained government spending pushed government deposits to record levels.
Higher deposits provide the government with a stronger fiscal buffer and improve cash flow management. Maintaining sufficient reserves can be valuable when governments face unexpected economic shocks or need to respond quickly to changing financial conditions.
However, AMRO also noted that the accumulation of government deposits contributed to tighter liquidity conditions in Cambodia’s banking system. This creates a policy challenge because government financial management can influence liquidity available elsewhere in the financial system. As a result, maintaining a healthy fiscal position also requires careful coordination with monetary and banking authorities.
AMRO Calls for Closer Fiscal and Monetary Coordination
Against this backdrop, AMRO recommended stronger coordination between cash management and debt management, better cash flow forecasting and closer cooperation between the Ministry of Economy and Finance and the National Bank of Cambodia.
The objective is to manage fluctuations in banking system liquidity more effectively while ensuring fiscal and monetary policies operate smoothly alongside each other. Better coordination could help authorities avoid unnecessary liquidity pressure while maintaining the government’s ability to finance its priorities.
This issue will become increasingly important as Cambodia balances targeted fiscal support with spending discipline. Effective coordination can also help ensure that government borrowing and deposits are managed in a way that supports broader financial stability rather than creating additional pressure within the banking system.
Cambodia’s Credit Outlook Remains Stable
Despite the fiscal challenges, Cambodia’s sovereign credit outlook remained stable during the period. Moody’s Ratings revised the country’s outlook from negative to stable in April, citing reduced downside risks and improvements in economic, fiscal and institutional prospects.
A stable sovereign credit outlook can provide an important signal to investors and financial markets regarding perceptions of the country’s economic and fiscal conditions. While a credit outlook is only one part of an investment decision, improved confidence in fiscal and institutional prospects can support a more favourable environment for long term economic activity.
Cambodia has also continued developing longer term financing initiatives. Among them is a $109 million Climate Finance Facility designed to mobilise private investment in low carbon and climate resilient projects, linking public financial policy with opportunities for private sector participation in sustainable development.
Economist Urges More Efficient Public Spending
Leading economist Duch Darin said the latest revenue and expenditure figures indicate a positive development for Cambodia’s public finances.
“I believe that this revenue and expenditure data is a positive sign for the stability of public finances in Cambodia.”
Darin stressed that maintaining economic growth will require stakeholders to improve spending efficiency and use resources effectively. He identified infrastructure, digitalisation, education and health as important areas for investment because of their potential to strengthen productivity and create jobs.
“At the same time, coordination between fiscal and monetary policies is also important to manage liquidity in the system appropriately,” he added.
His comments underline a key issue facing Cambodia as it moves through the remainder of 2026. The question is not simply whether the government has enough financial resources, but whether those resources are being directed toward investments capable of generating sustainable economic returns.
Productivity and Jobs Will Shape the Next Phase
As Cambodia moves into the second half of 2026, effective public spending will remain important to maintaining economic growth. Investment in infrastructure, digitalisation, education and health could strengthen the foundations for productivity while supporting employment opportunities.
For businesses and investors, government spending in these areas can also influence the wider operating environment. Better infrastructure can improve connectivity and logistics, digitalisation can increase efficiency, while stronger education and health systems can contribute to a more capable and productive workforce.
At the same time, careful management of government deposits and borrowing will be necessary to avoid placing unnecessary pressure on banking system liquidity. Cambodia therefore faces a balancing act between maintaining fiscal reserves, supporting economic activity and ensuring that financial conditions remain stable.
Cambodia’s Fiscal Balance Will Matter for Future Growth
AMRO’s assessment suggests Cambodia begins the second half of 2026 from a position of positive but moderating revenue growth, lower expenditure and continued targeted fiscal support. The country has strengthened its financial buffer while maintaining measures designed to protect households and businesses from economic pressures.
The next stage will depend on the quality of implementation. Stronger coordination between fiscal and monetary authorities, more accurate cash flow forecasting and more efficient public investment could help Cambodia maintain financial stability while directing resources toward areas that generate lasting economic value.
For Cambodia’s business community and investors, the broader message is important. Fiscal discipline creates resilience, but productive investment creates growth. The country’s ability to combine the two will help determine whether its current financial strength becomes a foundation for stronger productivity, employment and sustainable economic development in the years ahead.