The FY 2022 budget bill, expected to be signed into law by President Surangel Whipps Jr., today, is unbalanced and exceeds available funding by over $2.7 million dollars.  Funds Availability Analysis submitted with the budget bill to President Whipps showed $82 million in projected revenue and $85 million in authorized expenditures.

Moreover, the shortfall gap can further widen if the Tax Reform bill is not passed by OEK.   The $15 million ADB loan is listed as a source of financing for the FY 2022 budget but it is a policy loan conditional on the passage of the tax reform bill.  The bill is not seeing much traction in the House of Delegates.

Minister of Finance Kaleb Udui Jr. in his letter to President Whipps said that the “increased levels of appropriation cannot be sustainably supported unless certain actions are undertaken.  One of those immediate actions would include passing the Tax Reform bill.”

Additionally, he warned that the “overall budget will need to be decreased by 18% from what you had initially proposed in order to accommodate FY 2022 appropriations.”

Proposing another solution to the budget shortfall issue, OEK included in the budget bill a language urging President Whipps to request the United States government to separate and treat the $35 million from the last Compact Review Agreement that was amended from Direct Economic Assistance to Trust Fund to revert back so that Palau can use it to address its economic crisis as a result of the ongoing pandemic. OEK also passed a Senate Joint Resolution 11-17 urging the same.

The current national budget FY 2021 will expire this Thursday, September 30, 2021 and if the budget is not passed before then, government will close until budget is passed.

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