Major Cambodia bank's unsecured bonds not proof country is 'bankrupt': experts

This article is more than one year old.
Published on November 17, 2023 at 04:07
3 min read
By Panisa AEMOCHA, AFP Thailand

A major Cambodian bank issuing 100 million dollars in unsecured bonds -- those not backed by collateral -- is not proof the kingdom is bankrupt, finance experts say, refuting false social media posts. Representatives from global lenders International Monetary Fund and the World Bank separately told AFP their most recent assessments indicate Cambodia has low bankruptcy risk.

"Cambodia is bankrupt! It asked Thailand for money worth 3.7 billion baht," reads a Thai-language Facebook post shared on October 15.

It features a nearly 17-minute video where a narrator discusses a recent announcement by ACLEDA Bank -- the second largest commercial bank in Cambodia -- that it had obtained approval to issue subordinated unsecured bonds in Thailand worth 3.7 billion baht (100 million dollars).

Such bonds are not backed by collateral and their holders rank lower than those who hold "secured" ones in terms of compensation in case of a default.

"This situation is reminiscent of the financial crisis in Laos, where the currency is relatively weak compared to the Thai baht," the narrator says, referring to Thailand and Cambodia's neighbouring economy reportedly weighed down by large external debt.

"In August, Laos experienced a financial crisis, prompting the country to issue bonds seeking investment from Thailand to support its declining economy."

The video has been viewed over 600,000 times since it was posted.

A screenshot of the false post, captured on November 7, 2023

Similar posts falsely claiming ACLEDA Bank's announcement means the kingdom is bankrupt were also shared elsewhere on Facebook and on YouTube.

Low bankruptcy risk

Representatives for the IMF and the World Bank, however, separately refuted the posts.

"Bankruptcy is when a country is unable to pay its debt or interest," Jochen Schmittmann, the IMF representative in Cambodia, told AFP on November 7 (archived link).

"This is not the case in Cambodia," he said.

An IMF report on the kingdom's economy published on October 31 states: "Despite a small projected increase in public debt to GDP over the medium term, risks of debt distress remain low" (archived link).

A representative for the World Bank separately told AFP on November 11 that its latest assessment in November 2022 indicates Cambodia is at low risk of a balance of payments and sovereign debt crisis (archived link).

"This is the best (safest) debt sustainability rating a country can get."

'Purely private'

Responding to the claim, Soksensan Meas, spokesman for the Cambodian Ministry of Economy and Finance told AFP on November 2: "When it comes to ACLEDA Bank it is purely a private matter" (archived link).

Stephen Higgins, co-founder and managing partner of Cambodia-based investment firm Mekong Strategic Capital, told AFP on November 14: "Acleda's balance sheet management decisions have nothing to do with the Cambodian government" (archived link).

ACLEDA Bank's announcement to issue bonds in Thailand was based on a strategic assessment of market conditions, the bank's executive vice president and chief legal officer Buth Bunseyha said on November 8 (archived link).

"In addition to the Thai market, we look into additional nations for the issuance of our securities," she told AFP.

Ariya Tiranaprakij, senior executive vice president of the Thai Bond Market Association, said on November 11 that while unsecured bonds are considered riskier, they make up "80 percent of bonds issued in the market" (archived link).

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