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Nena Asks Congress FSM Water Project Financing Agreement

PALIKIR, Pohnpei (FSM Information Service): August 12, 1997 - President Jacob Nena transmitted to Congress Speaker Jack Fritz on July 28, 1997, a proposed legislation which seeks three changes to the Water Project financing agreement whereby money is to be relent from the FSM to a state and from the state to its utility company.

The first change is to have the FSM National Government be responsible for paying the full loan outstanding if the Asian Development Bank calls for an accelerated payment of the loan as a result of a default of a state or states on its scheduled repayments instead of penalizing individual states who are making the repayments as scheduled. Originally, the Financial Agreement allows for the ADB to accelerate or call for the full repayment of the loan balance if one or more states defaulted, even though other state or states are meeting their agreed repayment schedule.

The change was requested by Yap as a condition for its willingness to participate in the project, Nena said.

The second amendment primarily clarifies what is already in the Financial Agreement in the hope that it will provide some comfort for Pohnpei State, which is balking at the provisions for securing loan repayment, Nena said.

Finally, the third change reflects the extension of the grace period for a state from five years to 10 years, but the grace period for the utility companies remain at five years.