Government of the Federated States of Micronesia

Chuuk State employees will benefit from China grant funds as bank loans, life insurance benefits and medical coverage become available again

Palikir, POHNPEI (FSM Information Service): March 18, 2008 - Chuuk State Government employees will soon be eligible to make bank loans again and to receive life insurance benefits and medical insurance coverage, thanks to payments authorized by FSM President Manny Mori from the $4 million financial grant that FSM has received from the People's Republic of China.

In a letter to Chuuk State Governor Wesley Simina, on March 4, 2008, President Manny Mori informed the Governor that he has directed the final payment of $1,691,143 to Chuuk State Government from grant funds made available by the PRC Government, to assist the State's continuing financial recovery program and for priority payments that provide direct benefits to the employees of Chuuk State Government and to the economy of Chuuk as a whole.

The President's directive is made pursuant to Congressional Resolution No. 15-74, which designated the President as the duly authorized grant administrator for the $4 million financial grant that the FSM received from the Government of the People's Republic of China in July 2007. The approved payment is the final disbursement of the $3.5 million earmarked for Chuuk State from those funds.

In February 2008, President Mori approved an earlier disbursement of $1.8 million from the grant funds for other outstanding liabilities owed by Chuuk State Government. This included $1,200,000 million for outstanding payment of employee benefit obligations to the FSM Social Security Administration, $358,856 to the Bank of FSM for Chuuk State Government bank overdraft facilities, and $250,000 for Income Tax payments owed to FSM Finance.

The latest sums disbursed are for specific purposes. In an agreement reached with the Bank of FSM, $114,249 will be paid to the Bank to cover outstanding Government employee allotments that the State Government has not paid on to the Bank. As part of the agreement BFSM has agreed that those government employee borrowers whose allotments were not paid by the State Government during this period will not be penalized with any adverse credit rating as a result. The Bank of FSM has also agreed that it would reopen its consideration of loans to Chuuk State Government employees.

An amount of $102,081 has been allocated for payment of un-transferred employee allotments to the Bank of Guam and President Mori said he is hopeful of reaching a similar agreement with the Bank of Guam regarding credit treatment of affected employees and the resumption of their loan eligibility.

The President's directive also authorizes $1,000,000 to be used for payment of outstanding loan commitments that Chuuk State Government has with the national government.

In order to avoid any adverse impacts on future Aid from Japan, $250,000 will be used to pay off about 50 percent of an outstanding claim owed by Chuuk State Government to Penta-Ocean, a Japanese contractor, for previous work in the State.

A further $132,432 will be paid to IAC, the Life Insurance provider used by Chuuk State Government for its employee benefits program, to meet an April deadline in order for IAC to release benefit payments to several State Government employees.

The final approved use for the $1.6 disbursement of China grant funds to Chuuk will be for partial payment of unpaid allotments in health insurance premiums from November 11, 2006 to April 17, 2007, amounting to $92,380. This will ensure continued health insurance coverage for Chuuk State Government employees and their dependents.

Noting public questions on this matter, President Mori said that the use of the China grant funds for financial recovery efforts in the two states that are facing financial crises is in the overall national interest. The President said the nation as a whole faces a moral and compassionate obligation to step in where past lapses and poor management now impose an intolerable burden on the current and future citizens of any of the FSM states.

President Mori said it was also clear that chronic financial insolvency and instability in any one state has a negative impact on the national government and on all other states. He noted that national tax revenues have been reduced by unpaid state obligations, thereby reducing the overall capacity of the national government.

The President said he was also very concerned that government non-payments could threaten the viability of critical national joint services, such as the government supported life insurance benefit programs, FSM national medical insurance program, the FSM Social Security program and even the financial solvency of the nation's financial institutions.

President Mori also noted that the financial problems of one state very frequently affects the perception of vendors toward government transactions anywhere in the FSM, indirectly placing constraints and extra costs on the other FSM governments.

For further information on this release, please contact:

FSM Office of the President
Public Information: Press, Radio, Video
P.O Box 34
Palikir Station, Pohnpei, FM 96941
Tel.: (691) 320-2548/2092
Fax.: (691) 320-4356