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Annual Report 2002 : Pacific

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Marshall Islands

Economic performance

In 2002, the Marshall Islands maintained prudent expenditure and the financial position improved, favored by the absence of debt repayments. In FY2002 (ending September 2002), the Government placed $15.5 million in the Marshall Islands Intergenerational Trust Fund (see http: //www.adb.org/Documents/Books/ADO/2001/rmi.asp), participated in also by ADB, and an additional $15 million (close to 15% of GDP) was allocated for FY2003. The US dollar is used as a local currency; inflation was stable at 2%. The public sector wage freeze initiated in the late 1990s through ADB support continued in 2002, thereby reducing real wages and facilitating a 10% nominal cut in the second half of 2002.

ADB operations

Operational strategy: ADB’s strategy in the Marshall Islands aims to strengthen public sector governance and increase public sector productivity; support the creation of new economic opportunities and improve the access to basic social services in the outer islands; and enhance the environment for private sector investment, job creation, and growth. The Government remains committed to reforms, fiscal targets are being met, and other public sector reforms are on schedule.

Policy dialogue: Negotiations for renewing the Compact of Free Association with the US neared completion in 2002. Financial assistance through the Compact over the next 20 years would be accompanied by an emphasis on improved public sector governance and accountability.

Loans and technical assistance: One loan of $7 million was approved in 2002 to develop transport infrastructure in the outer islands. Two technical assistance totaling $670,000 were also approved (see tables 1, 6, 24, and 25 in the Statistical Annex).

Project implementation: Since joining ADB in 1990, the Marshall Islands has received 12 loans totaling $78.1 million, of which 5 were active at the end of 2002. Contract awards totaled $8.4 million, bringing the cumu- lative figure to $56.7 million. The contract awards ratio for 2002 was 37.1%—higher than the ADB-wide average of 22.6%. Disbursements in 2002 totaled $8.3 million, bringing cumulative disbursements to $56.5 million. The disbursement ratio was 50.0%—higher than the ADB-wide average of 22.2% (see tables 14–23 in the Statistical Annex).

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