Palau: Recovery through Improved Systems and Expenditure Support Program (Subprogram 2)

Sovereign Project | 54284-002

The Recovery through Improved Systems and Expenditure Support (RISES) Program comprises two subprograms supporting public sector management reforms that will facilitate Palau's recovery from the coronavirus disease (COVID-19) crisis. Subprogram 2 deepens and implements reforms initiated under subprogram 1, which was approved on 23 April 2021. Overall, the program seeks to (i) strengthen the policy and legislative framework for public financial management; (ii) reduce fiscal risks from weak management of public revenue, expenditure, and liabilities; and (iii) support private sector development, toward restoring sustained and equitable economic growth. Under subprogram 2, ADB supports 10 prior actions, all of which have been completed. The proposed budget support amount is $30 million (regular OCR) under subprogram 2 in FY2022, which along with the $25 million ($20 million COL and $5 million OCR) approved under subprogram 1, brings ADB's total financing under this program to $55 million.

Project Details

  • Project Officer
    Rabanal, Rommel F.
    Pacific Department
    Request for information
  • Country/Economy
    Palau
  • Sector
    • Public sector management
Project Name Recovery through Improved Systems and Expenditure Support Program (Subprogram 2)
Project Number 54284-002
Country / Economy Palau
Project Status Active
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 4206-PAL: Recovery through Improved Systems and Expenditure Support Program (Subprogram 2)
Ordinary capital resources US$ 30.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Gender Equity and Mainstreaming
Governance and capacity development
Private sector development
Sector / Subsector

Public sector management / Economic affairs management - Public expenditure and fiscal management

Gender Equity and Mainstreaming Effective gender mainstreaming
Description

The Recovery through Improved Systems and Expenditure Support (RISES) Program comprises two subprograms supporting public sector management reforms that will facilitate Palau's recovery from the coronavirus disease (COVID-19) crisis. Subprogram 2 deepens and implements reforms initiated under subprogram 1, which was approved on 23 April 2021. Overall, the program seeks to (i) strengthen the policy and legislative framework for public financial management; (ii) reduce fiscal risks from weak management of public revenue, expenditure, and liabilities; and (iii) support private sector development, toward restoring sustained and equitable economic growth. Under subprogram 2, ADB supports 10 prior actions, all of which have been completed. The proposed budget support amount is $30 million (regular OCR) under subprogram 2 in FY2022, which along with the $25 million ($20 million COL and $5 million OCR) approved under subprogram 1, brings ADB's total financing under this program to $55 million.

Although Palau demonstrated sound macro-fiscal management by maintaining annual fiscal surpluses averaging 3.0% of GDP during FY2011FY2019, the lingering impacts of the coronavirus disease (COVID-19) pandemic have heightened fiscal risks that can constrain sustainable recovery. Recognizing these risks, the government has developed an ambitious reform agenda comprising critical policy reforms to, among others: develop an overarching fiscal responsibility legislation and a corresponding medium-term fiscal strategy; implement a comprehensive tax reform package to modernize and increase the efficiency of Palau's tax system; and strengthen the legal and institutional frameworks for international commercial arbitration, public-private partnerships, and business registrations. The RISES Program aligns with and supports government's broad-ranging reform agenda to help shift Palau's economic recovery onto a more sustainable path.

Project Rationale and Linkage to Country/Regional Strategy The programmatic approach comprises two subprograms in support of public sector management reforms to bolster Palau's recovery from the COVID-19 crisis. Subprogram 2 is the final subprogram, deepening and implementing the reforms initiated under subprogram 1, which was approved and disbursed in 2021._All policy actions completed under subprogram 1 remain in effect. Subprogram 2 builds on the achievements of subprogram 1 and further supports the government to strengthen PFM, reduce fiscal risks, and promote private sector development to restore sustained and equitable economic growth. The program is aligned with Strategy 2030 of the ADB and its operational priorities of strengthening governance and institutional capacityincluding a differentiated approach to institutional strengthening and private sector development in small island developing statesand accelerating progress in gender equality._It is consistent with the Pacific Approach 20212025, which prioritizes PFM improvements to achieve the strategic objective of preparing for and responding to shocks, and the broader goal of building resilience.
Impact

Quality of life for current and future generations of Palauans enhanced

Project Outcome
Description of Outcome

Palau's economic recovery from the COVID-19 crisis shifted toward a more sustainable fiscal path

Progress Toward Outcome
Implementation Progress
Description of Project Outputs

Policy and legislative framework for public financial management strengthened

Fiscal risks from weak management of public revenue, expenditure, and liabilities reduced

Private sector development supported

Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location Nation-wide
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Responsible ADB Officer Rabanal, Rommel F.
Responsible ADB Department Pacific Department
Responsible ADB Division PASP
Executing Agencies
Ministry of Finance
Timetable
Concept Clearance -
Fact Finding 11 May 2022 to 12 May 2022
MRM 15 Jun 2022
Approval 31 Aug 2022
Last Review Mission -
Last PDS Update 31 Aug 2022

Loan 4206-PAL

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
31 Aug 2022 15 Sep 2022 13 Oct 2022 31 Jan 2023 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 30.00 Cumulative Contract Awards
ADB 30.00 25 Oct 2022 0.00 0.00 0%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 25 Oct 2022 30.00 0.00 100%

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