The Palau government performed well financially in FY 2023, with higher-than-expected revenue collections and controlled expenditures. The main contributing factors to the higher-than-expected revenue collections are tax reform, Digital Residency, and military activities. The government also benefited from a surplus from last year as a result of a controlled spending policy.
“ I would just characterize as saying, we did well last year. We expect both revenues to be higher than we had budgeted and forecasted,” said Minister Udui.
The main contributing factor to the higher-than-expected revenue collections is tax reform, the Palau Goods and Services Tax (PGST), said Minister Udui.
PGST was higher than expected, but according to Minister Udui, this was because Palau has not been collecting “what we should have been before.” “The hole is bigger than what we thought, so we have closed that hole, and we have benefited from that.”
The revenue from Digital Residency also contributed to the government’s good performance, with one million in revenue from such a small program, reported Minister Udui.
Tourism has not performed as well as expected, but the military activities have contributed due to military presence and the US military’s ongoing capital improvement projects, such as the airport repair in Peleliu.
Another reason for the government’s positive financial performance is the surplus from last year resulting from a controlled spending policy. “Budget savings plus increased revenue will allow us to have a surplus from 2023.
In the FY 2024 budget, the government budgeted $30 million from the COFA Trust Fund to fund government operations. President Whipps said he will not withdraw the $10 million from the COFA Trust Fund but will use local revenue, the surplus, to cover the shortfall.
“We prefer not to draw from the Trust Fund because we are not sure of the future of the market,” added Minister Udui. The future of the stock market is uncertain with so much volatility
Minister Udui said they planned well for FY 2024, expecting the Compact Review Agreement to be passed by January. By then, he said we will have a better picture of where we are and prepare ourselves for the next challenge that may come and build up reserves in case of emergency such as the COVID-19 pandemic.