The World Bank on Tuesday suspended further loans to Cambodia until its government resolves a dispute over the evictions of thousands of poor landowners in the capital.
The bank's country director Annette Dixon said the institution was still encouraging the government to provide on-site housing for the remaining residents of Boeung Kak Lake.
"Discussions between the government and residents are ongoing, and we look forward to an early resolution of this issue," she said in a statement.
"Until an agreement is reached with the residents of Boeung Kak Lake, we do not expect to provide any new lending to Cambodia," she said.
The low-income residents along the lake are being evicted to make way for commercial development.
Government spokesman Khieu Kanharith referred inquiries to the Finance Ministry, where a spokesman could not be reached for comment.
Dixon said existing projects will still be implemented. Around 16 projects worth about $343 million are ongoing, mainly for health, and education. The bank's last loan was made in December.
The World Bank had funded a $24 million program to strengthen property rights. In March, bank inspectors acknowledged that the program was flawed, had violated bank policies and may have contributed to or ignored the likelihood of evictions. It demanded the Cambodian government halt evictions and agree to fair compensation for landowners, or face unspecified consequences.
Boeung Kak landowners have decried as laughable current offers of compensation, which include around $9,000 and an apartment far outside of the city, given what they say the land is now worth. The government, however, has refused to consider the main proposal for a 35-acre (15-hectare) plot at Boeung Kak to be set aside for housing.
Landowners at the lake had expected that their claims _ many of them long-standing _ would be respected when government workers began surveying the area in 2006. But the government abruptly shut them out of the process in early 2007, and then surprised many by announcing a $79 million, 99-year lease to a developer with close ties to Prime Minister Hun Sen.
In 2008, developers began pumping sand into the lake, flooding out homes and all but destroying the lake's ecology.