Journal Staff

KOROR, Palau — Palau’s economy showed growth in the last two decades, despite declining funds from the Compact, according to the data presented by a team of economic experts from Graduate School USA and the Asian Development Bank during a presentation at the Palau Congress on  Jan. 23, assessing the economic impacts of a scenario of an end of Compact Grant assistance.

The assessment is to assist Palau with “the uncertainties and potential fiscal and economic shocks resulting from the termination of the U.S. compact grant assistance.”

Palau’s Compact is up for renegotiation, as its financial package will expire by fiscal year 2024.

The experts said that although, “Palau and the United States relationship is strong and there no intention of stopping the funding, there’s still a need of certain requirement to continue the compact agreement.”

The report said while the Palau Compact “provided no mandate to negotiate an extended period of funding,” it is still necessary to avoid a major fiscal shock.

In Palau’s current agreement, the nation is getting budgetary support of a total of $22. 11 million already provided through a fiscal 2018 stopgap appropriation and $20 million in infrastructure funds.

Under the Compact, the U.S. also provides Palau $2 million annually from fiscal 2018 to  fiscal 2024, subject to Palau’s matching contribution of  $600,000 annually.

The Compact also provided Palau with a Trust Fund of $62. 25 million, which was deposited at the end of  fiscal 2018 as a supplement to achieve its goal of growing funds for Palau.

In a press statement on Jan. 31, the Palau COFA Trust Fund reported that by the end of the 2019 calendar year, it had a total balance of $298.4 million.

“We are very happy with the earnings of the Trust Fund in 2019, particularly following the volatility seen in 2018,” said Lindsay M. Timarong, chairperson of the board of trustees.

The COFA board said since the trust fund’s creation in 1994, it started with $70 million and has paid $101 million to Palau. Palau dips into the trust fund for budgetary support.

In 2019, the fund grew by more than $16 million, or 6%, during the first quarter of the current fiscal year. During the calendar year, total payments from the frust Fund to the government equaled $14 million, while net earnings exceeded $49 million. mbj