By: L.N. Reklai

President Tommy Remengesau Jr. expressed in a recent interview that Palau plans to initially invest the funds from the Compact Review Agreement into the Palau Trust Fund.  Funding for the Compact Review Agreement of 2010 was recently approved in the U.S. budget law after 8 years.

“It’s better late than never”, added Remengesau and said that Palau is working closely with United States on the disbursement.

The fact that 8 years later the agreement isfinally implemented is the reason Palau is seeking to invest the funds in the Trust Fund to mitigate inflation and minimize loss of value of the funds.

One of the challenges the Palau government is looking to address is the sudden drop of operations assistance funding from $18 million to $7 million.  The Agreement called for scheduled reduction of operations assistance every five years.  Palau has been receiving operations assistance without drop for the last 8 years and that adjustment is being made in the drawdown of the funds, which is expected to cause the sudden drop to $7 million from $18.

One possible solution is to use $10 million that was designated under the Compact Review to pay the outstanding government debts of 2009 to 2010 to mitigate the sudden drop in operations assistance.  Palau government after 2010, paid off that $10 million debt by itself while the funding from the Compact Review was still pending financing by the U.S. government.

Additionally, funding designated by the Compact for road maintenance, CIP and others were not applied on timely basis.

According to Remengesau, these proposals have been sent to Department of Interior and are still under discussion but he assured that before the end of fiscal year 2018, that they will have reached an agreement on this matter.

Palau government under Toribiong administration signed a new funding agreement with United States as allowed for under the Compact of Free Association in 2010.  The new funding agreement called for $229 million. Funding for the Agreement was not passed until this FY 2018, when it was included in the U.S. National Defense Budget that was signed into law by U.S. President Trump.

U.S. Department of Interior under its own discretionary appropriations act extended financial assistance of $13.1 million each year to Palau since 2010.  That amounted to $105.2 million and is now deducted from the approved funding.  The remaining to be disbursed to Palau is $123.9 million.