Koror State Government is seeking a 15 million dollar loan from the national government to assist with the expected state budget shortfalls through FY 2024.

In a letter to the national congress, Koror Governor Eyos Rudimch said that despite “drastic appropriation reduction” and other expenditure reduction efforts, the State still needs to find new revenue sources until the economic recovery returns.

Based on Horwath HTL/https://agbrief.com/news/china/20/04/2022/full-recovery-in-asia-tourism, tourism recovery for the key Asian markets for Palau, would at best probably reach around 50% of the pre-covid numbers, especially for Japan and Taiwan markets.  China, which was the largest market before, is not expected to return until 2025.

The loan, said Governor Rudimch, is to “meet operational and service obligations” while the state continues to exercise austerity measures.

“The state’s ability to battle its way through the financial storm is highly dependent on the loan financing request,” stated Governor Rudimch.

Governor Rudimch also informed the national lawmakers that Koror State is looking to establish a “Cyclical Reserve Fund”, a fiscal responsibility model to support the state in future economic and financial shocks.

The letter from Governor Rudimch also requests the national congress to amend the new tax law, Palau Goods and Services Act (PGST), to make it voluntary for state governments to join the PGST rather than keep the state government out of it.  Rudimch said that Koror State would lose around $500,000 in revenue from KSG tourism-related fees under the current law where the state is prohibited from registering with the PGST.

The unaudited financial statement for Koror State shows that in 2019 it earned a little over 10 million from fees, leasehold, and others. In FY 2020, that revenue dropped to 5.4 million, or about a 50% drop over 2019. In FY 2021, the revenue further dropped to 4.2 million, compared to 10.8 million in 2019.  Net income loss in 2020 was over 3.2 million dollars.  Last year, 2021, the loss was also at 3.4 million dollars.  Current reserves and austerity measures can not last and the $15 million is needed to cover the losses up to 2024.

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