ADB Helps Marshall Islands Improve Public Service Delivery

ADB Helps Marshall Islands Improve Public Service Delivery And Fiscal Sustainability

MANILA, PHILIPPINES (27 November 2012) – The Asian Development Bank (ADB) has approved a $5 million loan to boost public service delivery and help the Government of the Republic of the Marshall Islands (RMI) achieve fiscal sustainability through improving government finances.

The second subprogram under the RMI Public Sector Program supports the implementation of the government’s reform initiatives and initiates adjustments required to achieve long-term fiscal sustainability. Through the $9.5 million subprogram, approved in August 2010, policy actions were designed and the implementation of immediate reform priority reforms began. Subprogram 2 will complete the implementation of the policy actions. The Ministry of Finance is the executing agency for the program, and will oversee all policy, legal, and regulatory actions to be undertaken in connection with the program.

“Fiscal and structural reforms are needed to achieve fiscal sustainability and generate medium-term economic growth in Marshall Islands,” said Hayden Everett, Financial Sector Specialist in ADB’s Pacific Department.

The RMI economy relies heavily on government expenditure and on foreign grants which fund more than two-thirds of government expenditure. Economic growth over the medium term in the RMI is expected to stay low at around 1.5% and revenues are projected to decline. Because of this low-growth scenario, the RMI needs to adjust to the annual decline of the grants it receives from the United States under the Compact of Free Association, which will expire in 2023.

Structural reforms implemented by the program include the introduction of new legislation covering state-owned enterprises, tax, and fiscal responsibility and debt management; the adoption and implementation of reform plans for selected state-owned enterprises to improve their performance; and the completion of a public sector workforce audit and planning exercise. The tax reforms will boost domestic revenue collection, while implementing state-owned enterprise reforms and reducing public expenditures will contribute to improving the fiscal balance.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region. In 2011, ADB approvals including co-financing totaled $21.7 billion.

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