The kingdom's aid-dependent economy grew at a higher than expected rate of 5.2% last year but is tipped to fall to 4.3% in 2004 and then 1.9% next year, IMF resident representative Robert Hagemann said.

Billions of dollars in aid have been pumped into the country but the kingdom, ravaged by three decades of war that ended only in 1998, remains one of the world's poorest.

"Of growing concern is the growing income disparity that could lead to social unrest at some point," Hagemann told reporters as he released details of an IMF report.

"Governance remains a most serious problem in our opinion. Few countries rank lower than Cambodia on the corruption perception index."

Hagemann said the high poverty rates were particularly troubling since Cambodia had received more aid per head than any other low income country in recent years.

Aid would now be diverted from technical projects, which have received two billion dollars in the past decade, to agriculture and rural development, he said.

"We see this as unavoidably necessary for poverty reduction."

The garment sector, which comprises almost all of Cambodia's exports, has flourished but the IMF is forecasting that exports will drop by 11.5% in 2005 because of the kingdom's lack of competitiveness.

AFP