July 29, 2019

US: FSM, Marshalls likely to have money droughts post-2023

The U.S. Government Accountability Office (GAO) has confirmed what it and numerous others have reported earlier - both the Marshall Islands and Federated States of Micronesia are likely to have years when there is little or no money from their Compact Trust Funds to distribute after Compact grant funding ends in 2023.

A new report released this week by the GAO is titled: “Trust Funds for Micronesia and the Marshall Islands Are Unlikely to Fully Replace Expiring US Annual Grant Assistance.”

The GAO said the RMI and FSM “trust funds may not provide disbursements in some years or sustain their value after 2023.”

As of June 30, the FSM’s Compact Trust Fund was reportedly at US$681.5 million, while the RMI’s stood at US$431.7 million.

In confirming predictions from a report issued last year, the new GAO report said: “GAO’s 2018 report noted that the FSM and RMI compact trust funds face risks and may not provide disbursements in some future years.”

Currently, funding from the Compact of Free Association and U.S. federal grants account for 36 percent of the national budget of the Marshall Islands and 48 percent of the FSM’s national budget, according to the GAO.

The GAO said the RMI trust fund is likely to be adequately capitalised for it to make disbursements during the first 10 years post-2023 “nearly equal to the inflation-adjusted amount of 2023 annual (Compact) grant assistance.” But the each decade after the first 10 years, GAO predicts disbursements will likely decline by 10 percent.

GAO predicts there is a substantial possibility that during the 10 years after 2023, the FSM trust fund will not be able to disburse any money to the FSM in one or more years. The forecast for the RMI is less dire. GAO says there is only a 15 percent chance of a year with no funds available in the first 10 years after Compact grants end.

“GAO projected a 41 percent likelihood that the FSM compact trust fund would be unable to provide any disbursement in one or more years in fiscal years 2024 through 2033, with the likelihood increasing to 92 percent in 2054 through 2063. GAO projected a 15 percent likelihood that the RMI compact trust fund would be unable to provide any disbursement in one or more years in fiscal years 2024 through 2033, with the likelihood increasing to 56 percent in 2054 through 2063.”

The GAO’s new report said that the U.S. Interior Department has not implemented the six recommendations GAO made to address the risks to the funds’ ability to provide income after 2023.

Among the recommendations, the GAO pointed out that the trust fund committees have not developed distribution policies, required by the agreements, which could assist the RMI and FSM in planning for the transition to trust fund income.

SOURCE: MARIANAS VARIETY/PACNEW
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