1. Medium-Term Expenditure Planning
PALAU
Presented By: Darren & Chandler

2. Republic of Palau Population: 17,501 (2012 Mini Census)
Nominal GDP (FY2014): $249.1million
Annual Budget for FY2016: $84,459,200
Expenditures account for 36% of GDP (FY2014)
Sources of Funds:
Taxes
Grants
Other Revenue (permits, licenses, fees, etc.)
Compact Funds

3. Main Public Expenditures
Use of Goods and Services-10% of GDP
Utilities and Communications
Medical Supplies
Contract Services
Building & Construction
Compensation of Employees-15.3% of GDP
Wages
Medical Savings Account
Social Security
Pension Plan
Compensation of employees: Employer contributions to MSA, SS, CSPP

5. Expenditure Challenges/Pressures
Wage Bill
15.3% of GDP
38% of FY2014 Budget
Budget Reserve Fund
$1 million every fiscal year
Rebuilding after natural disasters
Typhoon Haiyan expenditures: $4.6 million in FY14
External Debt
28.3% of GDP
Most of the debt service is maintained by SOE sector, about 10% national government.

6. Future Costs Subsidy Programs for Low-Income Future Debts
FY2016: $1.6million for fixed and low income households for electrical power consumption
Future Debts
National government assumes debt responsibility if SOE defaults.
Infrastructure repairs and maintenance
Future Development Expenditures
New Correctional Facility (Prison)
Relocation of the national hospital
Relocation of landfill (dumpsite)

7. Hierarchy for medium Term Fiscal Planning
National Development Strategies (NDS):
guide the overall prioritisation of budgets and resource allocations
Medium Term Fiscal Strategies (MTFS):
identify the overall macroeconomic & related fiscal policies/strategies & priorities derived from the (NDS) for resources to be mobilised
Medium Term Fiscal Framework (MTFF):
takes the strategies from the MTFS and presents aggregate, medium-term macroeconomic & fiscal targets (revenue & expenditure) together with assessments of policy risks & vulnerabilities to ensure a stable budget position
Medium Term Budget Framework (MTBF);
with the MTFF as a starting point the MTBF disaggregates expenditure to agencies and indicates resource allocations based on NDS priorities
Medium Term Expenditure Framework (MTEF);
agencies take the MTBF resource allocations and allocate according to sector/agency performance targets

8. National Medium Term Development Strategies (MTDS)
Sector Policies & Strategies
Macroeconomic policy: GDP, BoP, income, employment, CPI
Medium Term Fiscal Strategies (MTFS)
Fiscal Policy and Strategies aligned to MTDS
Broad Targets for Fiscal Indicators/Ratios/Benchmarks
Medium Term Fiscal Framework (MTFF)
Forecasts for Revenue & Expenditure based on MTFS & MTDS Macroeconomic Policy
Medium Term Expenditure Framework (MTEF)
Detailed costing/output item & performance budget allocations
Medium Term Budget Framework (MTBF)
Line Ministry prioritised programs/projects
Firm Expenditure Ceilings for Line Ministries

9. Why are these MTFF/MTBF Needed in Palau?
The economy of Palau has experienced low rates of economic growth in the last three/four years
affected revenue flows to the government and has weakened the budget situation;
there is a need to:
Improve economic performance;
Restore budget sustainability;
Ensure better information for policy making and prioritization of resource allocation for the future
These objectives can be supported by a medium term fiscal framework and an MTBF
a set of basic economic and fiscal forecasts/targets
derived from a sound fiscal strategy;
leading to
Better coordination between finance and LMs;
Better budget planning and management by LMs
Sound economic & fiscal management

10. Thank You!!