1. slide RMI Economic Review JEMCO-JEMFAC, August 2013 Graduate School USA, Pacific & Virgin Islands Training Initiatives 1

2. slide Graduate School USA Pacific Islands Training Initiative www.econmap.org RMI Presentation Economic Performance Economic Policy Compact Trust Fund 36

3. slide Graduate School USA Pacific Islands Training Initiative www.econmap.org REAL GDP and Per Capita GDP 37 1.5% GDP Growth from FY03 to FY12 0.8% GDP Per Capita Growth

4. slide Graduate School USA Pacific Islands Training Initiative www.econmap.org Average Wage Rates 38 1.8% Average Private Wage Growth During Amended Compact Period 1.3% Average Public Wage Growth During Amended Compact Period

5. slide Graduate School USA Pacific Islands Training Initiative www.econmap.org Employment by Sector 39 1.1% Average Private Wage Growth During Amended Compact Period 1.8% Average Public Wage Growth During Amended Compact Period

6. slide Graduate School USA Pacific Islands Training Initiative www.econmap.org Govt Revenues vs Expenditures 40

7. slide Graduate School USA Pacific Islands Training Initiative www.econmap.org Govt Employment & Avg Wages 41

8. slide Graduate School USA Pacific Islands Training Initiative www.econmap.org External Debt 42

9. slide Graduate School USA Pacific Islands Training Initiative www.econmap.org FY12 Subsidies to SOEs 43 $11 million in Subsidies in FY12

10. slide Graduate School USA Pacific Islands Training Initiative www.econmap.org Outmigration & GDP 44 -7,148 -1.5% ANNUALLY

11. slide Graduate School USA Pacific Islands Training Initiative www.econmap.org CAP (not implemented) TRAM (under consideration) SOE Framework Legislation (with Nitijela) ADB Public Sector Program (closed-out) External Debt Management (with Nitijela) World Bank ICT Reform (underway) Decrement Management, MTBIF & the Fiscal Management Model (requires sustained attention) RMI Policy Initiatives 45

12. slide Graduate School USA Pacific Islands Training Initiative www.econmap.org RMI Policy Issues FISCAL MANAGEMENT ISSUES/OPPORTUNITIES Infusion of additional resources supports 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) Similar infusions likely in FY14: $5 million possible from World Bank (ICT reforms); Continued large surplus from VDS with anticipated increase to $6,000 daily rate. 46

13. slide Graduate School USA Pacific Islands Training Initiative www.econmap.org RMI Policy Issues DECREMENT MANAGEMENT, MTBIF & THE FISCAL MANAGEMENT MODEL RMI implementation of the MTBIF could have addressed 1 st step of the requirement for a decrement management plan Line agency ownership and leadership adoption were absent Budgets did not reflect commitments Table submitted to USG in late July based on the Fiscal Management Model provided only a medium-term revenue forecast. A serious dialogue to specify a way forward is required; sustained solutions will take time 47

14. slide Graduate School USA Pacific Islands Training Initiative www.econmap.org RMI Compact Trust Fund OBSERVATIONS Management of the CTF further streamlined and improved; investment costs are admirably low and investment policy monitoring/updates reflect high standard of care Annual report for FY2012 continues improvements, building on the FY2011 report Looming need to focus on “distribution policy” per TF Agreement Article 15(1) Projections on CTF “effectiveness” could be further improved for clarity New issue  25 percent of annual grants continue after FY2023 per Military Use and Operating Rights Agreement 48

15. slide Graduate School USA Pacific Islands Training Initiative www.econmap.org RMI Compact Trust Fund 52

16. slide Graduate School USA Pacific Islands Training Initiative www.econmap.org RMI Compact Trust Fund 54

17. slide Graduate School USA Pacific Islands Training Initiative www.econmap.org RMI Compact Trust Fund 55 $557m

18. slide Questions or Comments? JEMCO-JEMFAC, August 2012 56 Graduate School USA, Pacific & Virgin Islands Training Initiatives

19. slide Graduate School USA Pacific Islands Training Initiative www.econmap.org FSM Policy Issues PUBLIC EXPENDITURE & FINANCIAL ACCOUNTABILITY (PEFA) PEFA is a framework for the assessment of Public Financial Management (PFM) developed by the World Bank and IMF Implemented in many countries in the world PEFA focuses on PFM systems rather than fiscal objectives PEFA is based on an international standards and provides a precise measurement system. 28 high level indicators Further sub-categories FSM conducted a self and formal assessment with evaluators from PFTAC, World Bank, Forum, FSM, etc. Requested PFTAC to develop “Road Map” for PFM and PEFA 19