Pending President’s action
By: L.N. Reklai
The Palau Senate and House have approved a $122,434,700 budget for fiscal year 2024, a 19% increase over the FY 2023 budget. The budget is expected to be signed by President Surangel Whipps today, 30th of September 2023.
The budget includes a number of key features, such as:
- A $5.3 million increase in the state block grant
- A $60 bi-weekly salary raise for government employees
- Funding for facility improvements at the Belau National Hospital and government subsidies to the Palau Public Utilities Corporation and the Social Security Administration
- A $2.8 million escrow account for PPUC’s Purchase Agreement with Solar Pacific
- $150,000 to renovate three buildings in Guam damaged by typhoon
- A prohibition on PPUC and the Palau government paying the Asian Development Bank loan for the Koror-Airai Sanitation Project (KASP)
- A mandate for PPUC to calculate the percentage of the KASP loan charged to each customer and adjust customers’ billings by deducting the amount charged for the KASP loan payment
- Assistance for small and medium-sized companies that have loans with the National Development Bank of Palau and were adversely affected by the pandemic, including writing off interests and penalties and restructuring loans
The Palau government faces a number of challenges in funding its budget, including a slow economic recovery from the COVID-19 pandemic, a projected local revenue shortfall of $30 million, and a delay in the passage of the U.S. FY 2024 budget bill, which contains funding for the Palau Compact Review Agreement financial package. The Palau government is withdrawing $30 million from the Compact Trust Fund as a “stopgap” measure to address these challenges.
Analysis
The Palau FY 2024 budget is ambitious, given the country’s economic challenges. The government is relying on a number of sources to fund the budget, including local revenue, the Compact Review Agreement financial package and the Compact Trust Fund. However, the local revenue shortfall and the delay in the passage of the U.S. FY 2024 budget bill pose risks.
The government’s decision to withdraw $30 million from the Compact Trust Fund as a “stopgap” measure is understandable. However, it is important to note that the Compact Trust Fund is a finite resource, and the government should avoid using it to finance recurring expenses.
The government’s focus on increasing salaries for government employees and providing assistance to small and medium-sized businesses is commendable. These measures will help to stimulate the economy and create jobs. However, the government should also focus on reducing its own spending and improving efficiency.
Overall, the Palau FY 2024 budget is a step forward. However, the government needs to be realistic about its economic challenges and take steps to address them.