While a lot of work has been done to ensure that Palau is free of COVID-19 virus and prepared to handle potential cases of the virus, work to address the drastic impact of the pandemic on Palau’s economy is being worked on. The economic impact is said to be “unprecedented” by Minister of Finance Elbuchel Sadang in a letter to the Director General of the Asian Development Bank.
Palau’s tourism industry came to standstill on March 28 when the last visitors left the country and all airlines suspended flights to and from Palau. Ministry of Finance and Palau’s Joint Impact Mitigation Working Group in their assessment of the economic impact reported estimated 2,600 job loss with 700 jobs held by Palauans and 1,900 held by contract workers, representing 38% of private sector jobs. They further projected a 23% decline in GDP “totaling over $60 million” dollar loss for FY 2020 and FY 2021. Report also states a $45million-dollar revenue shortfall for FY 2020 and FY 2021. $17 million is the expected shortfall this year and $23 million expected shortfall in FY 2021.
Given these drastic numbers, number of relief measures are being proposed and some are already being offered. Banks are offering some measures including loan payment deferment schemes. Other relief measures are offered by utilities companies such as PPUC and PNCC offering not to cut services due to non-payment. Another offered include tax payment deferment by Bureau of Tax & Revenue on a case-by-case basis.
House of Delegates proposed a bill to cut Gross Receipt Tax down by 2% depending on the size of business. A citizen petition is being circulated online to demand the government to provide specific relief measures including a 90-day emergency monthly unemployment relief of $600 per person for people terminated from jobs, $500 for people whose wages have been reduced, 0% interest rate of one-time small business support loan, $1,000 per household one-time small scale agriculture support, 90-day GRT tax waiver and so on.
TheImpact Mitigation Working Group recommended strategy to the national leadership on measures to to address the impact said that “this fiscal adjustment strategy must recognize that there is “no one size fits all solution” so any relief measures must be targeted to affected businesses and individuals. Such relief measures must also be fully costed out to ensure fiscal and financial viability.”
According to Minister Sadang, a legislation is being drafted and will be proffered to the leadership this week which will specify budget for relief measures.
In the proposed Pandemic Budget Adjustment, it will authorize and appropriate $10 million from General Fund Reserve, authorize and appropriate ADB Contingent Line of Credit of up to $15 million and authorize the President to negotiate and secure $50 million in concessionary financing.
Expenditures from this proposed budget will include maintaining the current government operating budget, cover shortfalls that PPEF was suppose to fund including State budgets, Pension Plan, PNMS and PAN, NGOs and Non-public schools, and economic relief for affected individuals and businesses including “unemployment allowances through employers, interest-free loans for businesses to cover fixed costs and undertake upgrades, coverage of employee share of tax and benefit contributions, and funding support for alternative employment programs ..”.
Specifics are still not known as the bill is yet to be introduced.
Meanwhile, the online petition demanding relief is said to be submitted to the leadership this week after it garners enough signatures.