A bill to proposing to improve government fiscal responsibility, debt management procedures and enhance budget reserve funds was introduced at this 3rd Regular Session of the Senate, SB 11-39.
The proposal, which is one of the components of the Policy-Based Loan required by Asian Development Bank, was submitted by President Surangel Whipps Jr.
Whipps said that the bill is a “product of prior thoughtful discussions within the Ministry of Finance” and that the amendments proposed aligns current practices at the Ministry of Finance with public policies and updates the current law.
The 2 main components of the bill include, the “National Government Fiscal Responsibility Act” and the “National Government Debt Management”.
Some notable changes under the National Government Fiscal Responsibility Act includes requirement mandating President to present to OEK and “publish for public awareness” a four-year fiscal strategy for the administration upon taking office.
The “Fiscal Strategy” will serve to guide annual budget cycles. Also under this mandate, Minister of Finance will have to create a Medium-Term Economic and Fiscal Model. This model, based on past and current data from Palau’s audit results, will provide economic and fiscal projections in medium term and this will also serve to guide budget preparation.
Under this mandate, Ministry of Finance will be providing half-year and annual economic and fiscal forecasts including “potential impact of each economic and fiscal policy change under consideration by the government.”
The bill gives the Minister of Finance authority to obtain any information needed from agencies to prepare required forecasts.
It also mandates that all financial reports comply with US Generally Accepted Accounting Principles (GAAP).
Under the National Government Debt Management Act component of this bill, it sets forth certain guidelines required for acquiring national debts such as cap on borrowing and assessment of each potential debt on fiscal position of the government.
Last week, President Whipps signed an Executive Order 454 creating an office under the Ministry of Finance Office of Financial and Economic Intelligence Services (FEIS) to “perform monitoring and reporting functions on the economic and fiscal health of the Republic, formulate fiscal and macroeconomic policies and review Palau’s tax policies, infrastructure investments and external debt levels.”