Phnom Penh, Cambodia. Cambodia will repay $2.8 million that the World Bank said had been misappropriated from a demobilization project it financed, the government's finance minister said Wednesday.
The World Bank had warned Cambodia that it will freeze hundreds of millions of dollars in aid for the impoverished nation if it did not repay the funds before Feb. 15.
In a letter sent to the Cambodian government earlier this month, the World Bank said $2.8 million of a $6.9 million contract between the government and China-based contractor Jiangmen Zhongyu Motor Group Co. Ltd. amounted to "misused funds."
The bank had also said Cambodia must complete overdue financial management and audit reports needed to close the project to fund the supply and maintenance of motorcycles for demobilized soldiers.
"The money has already been transferred to an account and it can be withdrawn at any time," Finance Minister Keat Chhon said Wednesday without elaborating.
Keat Chhon did not say if the government would seek reimbursement of that money from the contractor, and it was unclear who had profited from the alleged fraud.
Cambodia, which as one of the world's poorest countries relies heavily on foreign aid, was criticized at a recent international aid conference by donors for its failure to tackle rampant corruption.
Jemal-ud-din Kassum, the World Bank's vice president for East Asia and Pacific, had warned Prime Minister Hun Sen that if Cambodia failed to take urgent steps to repay the misused funds, the bank would "be obliged to suspend disbursements" for several projects it has funded.
At risk were more than a dozen active projects worth some $297 million in loans from the multilateral institution.
"It is regretful for me that such a problem has occurred. This was because there were loopholes in the implementation," Keat Chhon said. "We must work to build good governance, so others stop suspecting that corruption was committed."