Pacific nations are supporting Palau’s call for debt forgiveness to cope with the challenges faced by the developing and low income countries due to the coronavirus pandemic.
Finance Minister ElbuchelSadang said the call was made during the Asian Development Bank (ADB) 53rd Annual Meeting of the Board of Governors online.
He said that Pacific was facing serious economic problems due to COVID-19.
At Wednesday’s Pacific Governors’s meeting with ADB President Masatsugu Asakawa, Sadang said that Palau raised the issue of debt relief and reclassification of the nation as a high-income country.
Under a high-income status, Palau is no longer eligible for grants.
Sadang said Palau’s proposal of debt forgiveness was included in the statement delivered by Federated States of Micronesia (FSM) Secretary of Department of Finance and Administration Eugene Amor on behalf of the Pacific nations.
Sec. Amor said Pacific members would also like ADB to consider restructuring of existing debts to allow delayed payments.
He said that ADB should also consider forgiveness of debts, “ as a last resort if the effects of the crisis deepens.”
Amor said COVID-19 has upended the Pacific economies and its impact are alarming.
In 2019, he said, the average of Pacific economies expanded by four percent , which was the region’s best performance.
But this year he said , Pacific economies are facing a 5 percent to 10 percent fall in the GDP.
For Palau, the ADB’s latest economic outlook forecast that its GDP is expected to contract by 9.5 percent in 2020 and 12.8 percent in 2021.
In the Pacific, governments are facing added challenges of accumulating external debts as COVID-19 is having devastating impacts to the small and most vulnerable nations in the region.
While most Pacific nations have kept the coronavirus at bay, Pacific Islands Forum Secretariat (PIFS) Senior Economic Adviser Denton Rarawa earlier told journalists that the region is feeling the brunt of the economic fallout.
The pandemic has also damaged Palau ‘s tourism industry. According to the ADB report released on Tuesday, Palau has one of the most tourism-driven economies in the Pacific, as annual tourism receipts provide 40%–50% of GDP.
“With minimal arrivals for much of FY2020, economic contraction this year is now expected to more than double the initial projection.
Further, with the government’s COVID-19 response plan prudently considering extending Palau’s closure to international tourism until a vaccine becomes available, arrivals could remain near zero for most of FY2021,” ADB said.

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