COVID-19 pandemic has greatly affected Palau, reported Minister of Finance Elbuchel Sadang and, “we have no choice but to get loans to help us and seek ways to pay for it.”
“We are not the only ones getting loans to help during this time,” stated President Remengesau. Many countries including those like Palau, are also seeking loans to help their countries ride out the pandemic.
Leaders of the Pacific are asking banks and donor countries to assist by loan forgiveness. “It has been done before and they can do it again,” addedRemengesau.
Responding to concerns that Palau is taking on more loans than it can afford to, Minister Sadang assured that even if Palau’s loan reaches 80% of its GDP, it can still pay for them.
He reported that the $30 million dollar loan Palau took out to build the capital was retired or paid off July of this year.
If Palau obtains the entire $60 million dollar loan that Olbiil Era Kelulau (OEK) had earlier authorize President Remengesau to seek, the total estimated payment of interest and principle each year of old and new loans will be about $6 million dollars.
Sadang believes that Palau can handle this payment, especially if it establishes the “new policies” aimed at strengthening Palau’s finances such as the tax reform and debt sustainability laws.
Most of the loans Palau have are loans to revenue generating agencies and are not paid out of the national budget according to President Remengesau. Airport Improvement loan is paid for by the airport. Loans to PPUC, BSCC, and PNCC are backed by the government’s guarantee but are paid for by revenue generated by the agencies themselves.
The $60 million loan that OEK authorized Remengesau to seek to mitigate the COVID-19 impact has been pre-approved with first tranche of $20 million already disbursed to Palau.
The remaining $40 million requires policy changes in order for it to be downloaded. The second tranche, $20 million requires that proposed fiscal policies be drafted and submitted before the funds are drawn down. The draw down of the final $20 million, requires that the proposed policies be enacted into law and published.

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