Phnom Penh: Kuwait has agreed to give Cambodia loans totalling $546 million to develop agriculture, build hydro-power facilities and construct roads, a Cambodian foreign ministry official said on Friday.

This is the second-biggest aid pledge ever received by Cambodia, after aid and loans totalling $601 million offered by China last year.

"This is showing a stronger relationship between Kuwait and Cambodia, both political and economic," Cambodian foreign ministry spokesman Sin Bunthoeurn told Reuters late on Thursday.

He said they planned to open embassies early next year. The two countries have had diplomatic ties since 1997.

A Kuwaiti newspaper reported that Kuwait had leased rice fields in Cambodia to secure food supplies after Prime Minister Shaikh Nasser Al Mohammad Al Sabah met Cambodian leaders earlier this month.

Some $486 million from the Kuwaiti loan will be invested in irrigation systems and hydro-power on the Stueng Sen river.