Loan cancellation a misunderstanding: Abhisit

He said it appeared the Cambodian government had come to the conclusion that Thailand would not extend the loan, and therefore decided to pre-emptively cancel the deal.

"There was some confusion. On one hand, they wanted us to confirm we would lend them the money and on the other hand, they were afraid we would not extend the loan to them. So they opted to cancel the loan first," Abhisit said.

"If there had been proper coordination, there would have been no problem. I think the problem will be sorted out in the end," he added.

The loan was approved by the government in August to finance the upgrade of a road from Surin province to the Cambodian city of Siem Reap.

The prime minister said there should be no problem if both sides had a chance to talk to each other. So far, the Cabinet has not decided to alter the plan to extend the loan and, if talks were held, the problem could be solved, he added.

On Friday, Cambodian Foreign Ministry spokesman Koy Kuong said his country did not need the loan and could afford to build the road on its own.