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A bill to authorize temporary relief measures to address the economic impact of COVID-19 pandemic on the private sector and the government of Palau was finally introduced in House of Delegates as SB 10-133-14 and adopted in its first reading on April 18, 2020.

The bill, a culmination of the work by the Joint Leadership COVID-19 Impact Mitigation Working Group, proposes $20 million for private sector relief program.  It is still proposed and Minister of Finance Elbuchel Sadang advises that amounts may change as it goes through the legislative approval process.

The proposed source for the $20 million include $4 million from Loan No: 3725-PAL and $16 million from funds to be borrowed once authorization is approved.

The $20 million is proposed to be allocated as follows, $5.8 million for loans to businesses, $8 million for Temporary Jobs Program, $5.5 million for Unemployment benefits and $700,000 for lifeline Utility Services.

The private sector relief fund program will be administered through the Ministry of Finance where businesses and individuals impacted may apply for assistance.

In addition, the proposed bill seeks to authorize the President to borrow up to $60 million to address the budget shortfalls of FY 2020 and FY 2021 as result of COVID-19 impact on the government revenue source.

Minister of Finance Elbuchel Sadang said that the funds sought will not only cover FY 2020 but also FY 2021.  “The expected impact of COVID-19 on the budget this year is about $17 million but next fiscal year, it is expected to be higher.  We can use our current reserves to cover this year but we have to also think about next fiscal year budget,” stated Minister Sadang.

Responding to concerns that have been raised by some members of the public that this administration may be putting the next government into major debt due to amount of borrowing planned, Minister Sadang said that if the next administration does not want the loans, they can always return the funds.

“It takes a long time for loan arrangements to process and since we are already in dialogue with funding facilities, when we are authorized, we can quickly process the loans.  A new administration will be starting all over and it will take a lot more time.  And they have the option to return the funds if they believe they have no need for it,” added Sadang.

Due to impact on businesses and expected downturn of global economies, government revenue for FY 2021 is expected to fall by $28 million.  Palau is seeking external funding to cover this remaining FY 2020 and FY 2021, expecting that business will rebound in FY 2022.

President Remengesau asks the public to be patient while the bill goes through the process.  “If we were a communist type government, it would be easy for just one person to make a decision but under a democratic government, it requires a process in terms of expending public funds.”

The House passed the bill in its 3rd reading yesterday reducing the amount to be borrowed from $65 million to $60 million and removed language allowing borrowing from individuals restricting borrowing to financial institutions or governments.