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ADB and RMI Sign $5 Million Loan for Public Sector Reform
MAJURO, REPUBLIC OF MARSHALL ISLANDS – A $5 million loan agreement with the Asian Development Bank (ADB) was signed today in Majuro to support the Government of the Republic of the Marshall Islands (RMI) as it continues implementing public sector reform initiatives to achieve long-term fiscal sustainability.
“This initiative reaffirms ADB’s long-term partnership with the Marshall Islands. While good progress has been made on fiscal and structural reforms under the program, further efforts are needed to generate sustainable medium-term economic growth in the Marshall Islands,” said Ayumi Konishi, Deputy Director General of the ADB’s Pacific Department, who represented the organization at the signing.
Dennis Momotaro, Minister of Finance, represented the Government of RMI.
The Marshall Islands economy heavily relies on government spending and foreign grants, which fund more than two-thirds of government’s budget. Most foreign grants are provided under an amended Compact of Free Association (or the Compact) with the United States. Economic growth over the medium-term in the RMI is expected to stay low at around 1.5% and revenues are projected to decline. Within this low-growth scenario, the RMI needs to adjust to the annual decline in United States Compact of Free Association grants, which will expire in 2023.
In 2010, ADB approved the Public Sector Reform Program and its subprogram one, which included design of policy actions and the implementation of immediate reform initiatives. Subprogram two, for which the $5 million loan was signed today, will complete the implementation of the policy actions.
Policy actions under the subprogram two that have already been achieved include: introducing new legislation covering state-owned enterprises, taxes, fiscal responsibility and debt management; adopting and implementing reform plans for selected state-owned enterprises to improve their performance; and completing a public sector workforce audit and planning exercise. Post-program monitoring will continue throughout 2013.
The $5 million equivalent loan comes from ADB’s Special Funds resources. RMI has been a member of ADB since 1990.