KOROR, Palau — The Olbiil Era Kelulau (OEK), Palau’s national congress, has approved a $5 million loan for the Koror State Government to stabilize its operations for fiscal years 2024-2025. The funding was authorized through Senate Joint Resolution 11-55 and is part of a larger $10 million allocation previously approved under House Joint Resolution 11-32-7S, SD1.
The loan is part of a $12.5 million policy-based funding program offered by the Asian Development Bank (ADB) to support state government operations. Under House Joint Resolution 11-32-7S, SD1 requirements, the loan necessitated the passage of a joint resolution by the OEK. Also, ADB requires fulfillment of specific policy actions outlined in the ADB Policy Design and Monitoring Framework.
Among the key conditions for the loan are the implementation of the Koror State Public Financial Management Reform Plan for 2024-2028 and the resolution of outstanding arrears. The Office of the President confirmed that Koror State has met these initial requirements and expressed its commitment to fulfilling the remaining obligations.
The $5 million loan represents the first tranche of the $10 million allocated for Koror State. It carries favorable terms, including a 20-year repayment period with a fixed annual interest rate of 1.0%, payable quarterly. For the first five years, payments will cover interest only, after which both principal and interest payments will be due until the loan is fully repaid.
The funding comes as a lifeline for Koror State, whose finances were severely impacted by the COVID-19 pandemic. The state lost over 60% of its revenue following the shutdown of its primary income source—fees collected from Rock Islands tourist permits. After nearly four years of relying on financial reserves to maintain operations, the state sought national authorization to secure loans to address its fiscal challenges.
While the funding provides much-needed relief, Koror State is required to overhaul its financial policies as part of the agreement. These reforms aim to ensure sustainable financial management and accountability moving forward.