KOROR, Palau (July 9, 2025) — President Surangel Whipps Jr. has submitted a $152.4 million proposed budget for Fiscal Year 2026 to the Olbiil Era Kelulau (OEK), prioritizing wage increases, social security reform, and cybersecurity—while also supporting key diplomatic efforts and reducing national debt.
This year, the House of Delegates will lead the initial deliberation of the budget. The Senate has requested that the Funds Availability Analysis (FAA)—a financial overview confirming how much money is available—be jointly signed by the President, Senate President, and House Speaker to ensure all branches are “working with the same numbers.”
“We want to work with the same numbers,” a Senate spokesperson said, emphasizing the importance of a unified fiscal baseline for efficient and cooperative review.
In his transmittal letter to Senate President Hokkons Baules, President Whipps described the proposal as balanced and conservative, designed to improve government services while addressing both current needs and long-term national goals.
Key Budget Priorities
The proposal includes a 10 percent salary increase for national government employees, along with increased state block grants to support similar adjustments at the state level. Whipps said this is intended to retain qualified workers and ensure fairness across the public sector.
To secure the future of Palau’s Social Security system, the proposal raises both employee and employer contributions from 7% to 8% starting October 1, 2025, and gradually increases the retirement age from 60 to 65 over five years. The same retirement age adjustment applies to the Civil Service Pension Plan.
The budget also funds the creation of a Cybersecurity Office within the Office of the President to address growing threats to government systems. Whipps stressed the urgency of building resilience against cyberattacks, calling them a serious national security risk.
Diplomatic and Regional Engagement
Palau is set to host the 2026 Pacific Islands Forum Leaders Meeting, a high-profile event that will bring together heads of government from across the region. The budget allocates funds to ensure the event is properly resourced, presenting a chance for Palau to showcase its leadership and attract international investment.
The proposed budget also includes funding to establish a Palauan embassy in Canberra, Australia. Citing Australia’s consistent support—most recently during the Pacific Mini Games—Whipps said the move would strengthen regional cooperation and diplomacy.
Fiscal Reform and Debt Reduction
The budget shifts the use of a $7.5 million loan from the Asian Development Bank from spending in FY 2025 to debt repayment in FY 2026, targeting high-interest loans to lower future fiscal burdens.
Additional proposed reforms include:
- Raising foreign labor fees for the first time in years to boost domestic revenue.
Clarifying utility ratemaking authority for the Palau Public Utilities Corporation (PPUC) to eliminate overlapping procedures and delays caused by recent legislation.
Removing restrictions on the use of Healthcare Fund revenue from alcohol and tobacco taxes to allow more flexibility in addressing health care needs.
Strengthening Oversight and Efficiency
The proposal also calls for:
- The creation of two new offices under the president focused on Compact Management and National Planning, to track spending and implementation of the 2023 Compact Review Agreement.
- Shifting procurement functions from the Bureau of Human Resources to the Ministry of Finance to improve efficiency.
- Technical amendments to clean up the Palau National Code, removing outdated or duplicate provisions.
President Whipps urged lawmakers to work together to pass a budget that addresses current challenges while preparing Palau for a more stable and prosperous future.
“We must act responsibly today to ensure a stronger, more resilient Palau for future generations,” Whipps said.
The budget proposal will now proceed to the House of Delegates for review, followed by Senate deliberation.