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Slide RMI Economic Review JEMFAC, August 2014 Graduate School USA, Pacific & Virgin Islands Training Initiatives 1.

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Presentation on theme: "Slide RMI Economic Review JEMFAC, August 2014 Graduate School USA, Pacific & Virgin Islands Training Initiatives 1."— Presentation transcript:

1 slide RMI Economic Review JEMFAC, August 2014 Graduate School USA, Pacific & Virgin Islands Training Initiatives 1

2 slide Graduate School USA Pacific Islands Training Initiative RMI Presentation Economic Performance Economic Policy Compact Trust Fund 37

3 slide Graduate School USA Pacific Islands Training Initiative REAL GDP and Per Capita GDP % GDP Growth from FY03 to FY13 1.1% GDP Per Capita Growth FY2004 Constant Prices

4 slide Graduate School USA Pacific Islands Training Initiative Sources of Growth 39

5 slide Graduate School USA Pacific Islands Training Initiative Employment by Sector % Average Private Employment Growth During Amended Compact Period 1.7% Average Public Employment Growth During Amended Compact Period

6 slide Graduate School USA Pacific Islands Training Initiative Real & Nominal Wage Rates % avg -2.6% avg 1.7% avg -2.3% avg

7 slide Graduate School USA Pacific Islands Training Initiative Govt Revenues vs Expenditures 42

8 slide Graduate School USA Pacific Islands Training Initiative Govt Employment & Wage Bill % employee growth FY07-FY13 1.4% wage bill growth FY07-FY13

9 slide Graduate School USA Pacific Islands Training Initiative External Debt 44 Outstanding Debt as % of GDP; Debt Servicing as % of Exports Debt servicing = 15% of general fund revenues in FY13

10 slide Graduate School USA Pacific Islands Training Initiative FY11-FY13 Subsidies & Capital Transfers to SOEs 45 $10 million in annual subsidies or 24% of general fund revenues

11 slide Graduate School USA Pacific Islands Training Initiative Outmigration 46 -7, % ANNUALLY in RMI -7,082 -1,015 -5,334 -1, ,197

12 slide Graduate School USA Pacific Islands Training Initiative Recently rolled out at Development Partners Meeting RMI Policy Initiatives 47 NATIONAL STRATEGIC PLAN DECREMENT MANAGEMENT PLAN (DRAFT) Incorporates elements of: Comprehensive Adjustment Program (CAP), Tax and Revenue Reform and Modernization (TRAM) and SOE Reform

13 slide Graduate School USA Pacific Islands Training Initiative RMI Policy Issues FISCAL MANAGEMENT—Recent Background Infusion of additional resources supported previously unplanned expenditures in FY13:  $3 million from World Bank (ICT reforms);  $6 million from ADB as 2nd tranche of PSP  Large surplus from Vessel Day Scheme (VDS), US treaty and $5,000 VDS rate; (MIMRA revenues in FY12 over $10 million) MIMRA revenue buoyancy continues in FY14 and beyond 48

14 slide Graduate School USA Pacific Islands Training Initiative RMI Policy Issues DECREMENT MANAGEMENT, MTBIF & “Stalemate FY14” RMI implementation of the MTBIF could have addressed 1st step of decrement management plan requirement  Line agency ownership and leadership adoption were absent  Budgets did not reflect commitments In the absence of “owned” policy initiatives coming from the RMI the dialogue process was seriously strained Constrained allocations for FY14 and a call for substantial progress by the outset of FY15 49

15 slide Graduate School USA Pacific Islands Training Initiative RMI Policy Issues % Real Reduction The Impact of the Decrement on Compact

16 slide Graduate School USA Pacific Islands Training Initiative RMI Policy Issues % Real Reduction The Impact of the Decrement on Global Ops Revenue

17 slide Graduate School USA Pacific Islands Training Initiative RMI Policy Issues DECREMENT MANAGEMENT: The RMI Leadership Conference Preliminary work in May 2014 to prepare ministries (15% exercise) Leadership Meeting convened in early July RMI leadership received a presentation outlining the fiscal challenges facing the RMI Two groups worked over two days to choose from among options… 52

18 slide Graduate School USA Pacific Islands Training Initiative RMI Policy Issues THE DECREMENT MANAGEMENT PLANNING PROCESS 54

19 slide Graduate School USA Pacific Islands Training Initiative RMI Policy Issues THE DECREMENT MANAGEMENT PLANNING PROCESS 55 Adjustment Options:  Expenditure Compression (Day One)  reduction in ministerial expenditures

20 slide Graduate School USA Pacific Islands Training Initiative RMI Policy Issues THE DECREMENT MANAGEMENT PLANNING PROCESS 54

21 slide Graduate School USA Pacific Islands Training Initiative RMI Policy Issues THE DECREMENT MANAGEMENT PLANNING PROCESS 55 Adjustment Options: Alternative Measures (Day Two)  Tax Reform  Use of a portion of MIMRA Funds (fishing fees)  $3m in FY10 to $15m in FY13  Reduction in subsidies to the SOEs  $9 million in FY13  Reduction in the utility payments to Majuro Landowners  $1m in FY10 to $2.1m in FY13

22 slide Graduate School USA Pacific Islands Training Initiative RMI Policy Issues THE DECREMENT MANAGEMENT PLANNING PROCESS 56 ‘DRAFT’ SURPLUS

23 slide Graduate School USA Pacific Islands Training Initiative RMI Compact Trust Fund OBSERVATIONS Recent strong market performance has improved outlook, but challenges remain for FSM especially; Looming need to focus on “distribution policy” per TF Agreement Article 15(1). 57

24 slide Graduate School USA Pacific Islands Training Initiative RMI Compact Trust Fund 58

25 slide Graduate School USA Pacific Islands Training Initiative RMI Compact Trust Fund 59

26 slide Graduate School USA Pacific Islands Training Initiative RMI Compact Trust Fund 60 $557m

27 slide Questions or Comments? JEMFAC, August Graduate School USA, Pacific & Virgin Islands Training Initiatives


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