Government of the Federated States of Micronesia

2023 Planning Committee assesses FSM economy and long-term fiscal stability at 2nd meeting

Saipan, CNMI (FSM Information Services): December 8, 2013 - The second meeting of the Federated States of Micronesia (FSM) 2023 Planning Committee was held in Saipan, Northern Marianas, on December 7-8 with the focus on creating long-term fiscal sustainability and evaluating feasible strategies in stimulating economic growth.

FSM President Manny Mori opened the meeting, noting the challenges facing the FSM economy with the expiry of financial assistance under the amended Compact of free Association with the United States in 2023.

The President also pointed to the need to sustain economic growth and emphasized the urgency for the strengthening of contributions to the Compact Trust Fund to ensure long-term fiscal sustainability and reduce the looming budgetary gap moving forward. Lack of action in addressing such shortfall at the present time will add more weight to the bleak financial burden that is foreseen to worsen at the start of fiscal year 2024.

The President further added that economic reforms, particularly revenue mobilisation and public administrative reforms, need to be immediately carried out to enhance and support economic growth strategies.

The State Governors from Chuuk, Pohnpei and Yap, and the Lt. Governor of Kosrae, concurred with the President's emphasis on far-reaching reforms and underscored the need to bolster fiscal stability and sustainability while growing the economy. The Leaders noted that for this to happen, clear and time-specific strategies and targets need to be designed and carefully executed with the greater involvement of private sector and development partners.

Updating the Committee on a number of on-going undertakings, the Secretary of the Department of Resource and Development (R&D) presented a progress overview on sectoral reforms and noted that challenges continue to be significant due to limited support and capacity constraints.

The 2023 Planning Committee Secretariat, led by the Office of Statistics, Budget and Economic Management, Overseas Development Assistance and Compact Management (SBOC), with support from the Asian Development Bank and Pacific Islands Forum Secretariat, presented a long-term fiscal sustainability analysis and options for creating fiscal space to support the accumulation of funds for the Compact Trust Fund. The Office of SBOC also emphasized that significant efforts on fiscal front, along with political and leadership resolve are imperative to closing the expected shortfall in the Compact Trust Fund by 2023.

Additionally, with assistance from the FSM Development Bank Chief Executive Officer, the Leaders were also provided an appraisal on the business climate in the FSM and the challenges that are faced by investors and entrepreneurs. The business climate overview, with input from both the FSM Development Bank and the Department of R&D, was done with awareness of the existing rating on the "ease of doing business" in the FSM and the need to address the impacts of such assessment on business opportunities throughout the FSM.

The Committee agreed that the next meeting will be held in April/May 2014 with focus on:

· Progressing the work on Comprehensive Action Plan to be launched in the near future; and

· Finalize and prioritize (by timeframe) the proposed economic growth strategies in the four priority areas - Tourism, Agriculture, Fisheries and Energy - and other cross-cutting issues (such as infrastructure development and financing), in steady consultation with the Private Sector and relevant stakeholders.

For further information, call SBOC at 320-6260 or email eadolph@sboc.fm.