Regions and Countries

	Table of Contents
p. 40 of 47 BACK | NEXT Developing Asia and the Pacific The global economy Newly industrialized economies Central Asian republics, Azerbaijan and Mongolia People’s Republic of China Southeast Asia South Asia The Pacific Cook Islands Fiji Islands Kiribati Marshall Islands Federated States of Micronesia Nauru Papua New Guinea Samoa Solomon Islands Tonga Tuvalu Vanuatu

Federated States of Micronesia

Economic performance

The real growth rate in FY2000 (ending 30 September) in the Federated States of Micronesia was 2.5 percent, led by manufacturing, construction, and transport. The Public Sector Reform Program, implemented in the latter half of the 1990s, facilitated a return to positive growth in 1999 and 2000. Exports more than doubled in FY2000, mainly because of increased fish exports. Imports also increased as growth returned to positive levels. The current account surplus, including official transfers, declined from $55.7 million in FY1996 to $6.5 million in FY2000 because of a decrease in the US Compact funding level. The inflation rate in FY2000 was estimated at 2.8 percent.

Domestic policies: The consolidated general government balance in FY2000 attained a surplus of 0.4 percent of GDP. Total revenues were $152.8 million, of which $96.0 million (42 percent of GDP) came as grants, including $79.4 million from the US Compact. There were improvements at the state level, but the fiscal deficit at the national level needs to be improved. To achieve self-sufficiency, domestic revenue and taxation administration need to be improved substantially. Introduction of a value-added tax is expected to improve revenue generation. Overall, the formal sector remained stagnant and unable to provide sufficient employment. The number of jobs in the private sector needs to be expanded. A policy environment for private sector development must be put in place to attract foreign direct investment, particularly in commercial agriculture, fisheries, and tourism. The lowest-income households are in the outer islands where there are few employment opportunities in the formal sector and commercial activity is weak.

ADB operations

Operational strategy: ADB’s operational strategy for the Federated States of Micronesia reflects the Government’s development strategy of implementing economic reforms—which was presented to the Fourth Consultative Group Meeting in Manila in February 2000—and is consistent with ADB’s goal to reduce poverty. The strategy will support two major complementary initiatives of consolidated public sector reforms and private sector-led economic growth. The needs of individual states will be emphasized. Stronger linkages will be established with the states’ performance and commitment to reform and policy-related dialogue. The strategic priorities also include improving basic social services and developing overall economic and policy management capacity of both national and state governments.

Policy dialogue: Policy dialogue with the Government focuses on reforms in public financial management and economic planning. A detailed program has been prepared for improving basic social services delivery. Long-term sustainability of economic reforms and a move toward economic self-reliance have been the major thrusts of ADB policy-related assistance. Improving state performance and better coordination between states and national governments to expedite decision making and implement well-coordinated programs nationwide were also important aspects of the continuing dialogue.

Loans and technical assistance: In 2000, ADB approved a $8.0 million loan for health and education. ADB also approved two advisory technical assistance grants totaling $800,000.

Project implementation: Since joining ADB in 1990, the Federated States of Micronesia has received four loans, of which three were active at the end of 2000. Contract awards totaled $5.6 million, bringing the cumulative figure to $29.4 million. The contract award ratio was 37.4 percent, higher than the ADB-wide average of 21 percent. Disbursements during the year totaled $4.4 million, bringing cumulative disbursements to $27.3 million. The disbursement ratio was 39.9 percent, higher than the ADB-wide average of 20.5 percent.

Two projects—Fisheries Development Project and Water Supply and Sanitation Project—were ongoing in 2000, and an additional loan for basic social services was awaiting effectivity. After a delayed start, the Micronesian Longline Fishing Company component of the fisheries project was operating satisfactorily and was profitable during the latter half of 2000. The Kosrae State component of the Water Supply and Sanitation Project was canceled and funds were reallocated to components of other states. Audited project accounts and financial statements were not always submitted on time. The environmental and social covenants were being implemented for both loans.

   

Back Marshall Islands	Next Nauru