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RMI Economic ReviewJEMFAC, August 2014
Graduate School USA, Pacific & Virgin Islands Training Initiatives
1
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
RMI Presentation
Economic Performance
Economic Policy
Compact Trust Fund
37
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
REAL GDP and Per Capita GDP
38
120.0
125.0
130.0
135.0
140.0
145.0
150.0
155.0
160.0
2,400
2,500
2,600
2,700
2,800
2,900
3,000
3,100
3,200
131.4
157.2
2,629
2,935
Real GDP GDP per capita
GD
P U
S$s
mill
ions
GD
P p
er
capit
a
1.8% GDP Growth from FY03 to FY13
1.1% GDP Per Capita Growth
FY2004 Constant Prices
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
Sources of Growth
39
FY09FY10
FY11FY12
FY13
-3.0
-2.0
-1.0
~
1.0
2.0
3.0
4.0
5.0
6.0
Domestic Fisheries Construction Public Administration Education
US
$m
illio
ns,
20
04
co
nst
an
t Pri
ces
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
Employment by Sector
40
FY03FY04
FY05FY06
FY07FY08
FY09FY10
FY11FY12
FY13
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
Private Sector Public Sector
Work
ers
em
plo
yed
1.0% Average Private Employment Growth During Amended Compact Period
1.7% Average Public Employment Growth During Amended Compact Period
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
FY03FY04
FY05FY06
FY07FY08
FY09FY10
FY11FY12
FY13
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000Private Sector Public Sector Real Private Sector
Wag
e R
ate
s $
's
Real & Nominal Wage Rates
41
1.4% avg
-2.6% avg
1.7% avg
-2.3% avg
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
Govt Revenues vs Expenditures
42
FY04FY05
FY06FY07
FY08FY09
FY10FY11
FY12FY13
50.0
60.0
70.0
80.0
90.0
100.0
110.0
120.0
130.0
Total Revenues Exp adjusted for CTF Total Expenditures
$'m
illio
ns
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
Govt Employment & Wage Bill
43
0
500
1,000
1,500
2,000
2,500
3,000
3,500
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
No
. o
f E
mp
loye
es
on
Pa
yro
ll
To
tal G
ove
rnm
en
t Pa
yro
ll $
'00
0
0.4% employee growth FY07-FY13
1.4% wage bill growth FY07-FY13
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
External Debt
44
FY04FY05
FY06FY07
FY08FY09
FY10FY11
FY12FY13
0%
10%
20%
30%
40%
50%
60%
70%
80%
Outstanding Servicing
Outstanding Debt as % of GDP; Debt Servicing as % of Exports
Debt servicing = 15% of general fund revenues in FY13
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
FY11-FY13 Subsidies & Capital Transfers to SOEs
45
AMIKAJUR
MWSCMEC
MIPAMISC
NTAMRI
Tobolar
-$2,500
-$2,000
-$1,500
-$1,000
-$500
$0
$500
$ '0
00
s
$10 million in annual subsidies
or 24% of general fund revenues
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
Outmigration
46
Ch
uu
k
Ko
sra
e
Po
hn
pe
i
Ya
p
FS
M
RM
I
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
-7,148
-1.6% ANNUALLY in RMI
-7,082-1,015
-5,334-1,766
-15,197
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
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
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
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
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
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
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
RMI Policy Issues
50
FY14FY15
FY16FY17
FY18FY19
FY20FY21
FY22FY23
$15
$17
$19
$21
$23
$25
$27
$29
$26.77
$22.55
$21.80
FY14 Compact Grantl in constant real value Compact grants--Projected
US
$m
illio
ns
18.5%Real Reduction
The Impact of the Decrement on Compact
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
RMI Policy Issues
51
FY14FY15
FY16FY17
FY18FY19
FY20FY21
FY22FY23
$45
$50
$55
$60
$65
$70
$75
$80
61.80
61.10
72.52
FY14 Global Ops Revenue in constant real terms Global Ops Revenue--Projected
US
$m
illio
ns
14.8%Real Reduction
The Impact of the Decrement on Global Ops Revenue
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
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
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
RMI Policy Issues THE DECREMENT MANAGEMENT PLANNING PROCESS
54
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
RMI Policy Issues THE DECREMENT MANAGEMENT PLANNING PROCESS
55
Adjustment Options: Expenditure Compression (Day One)
reduction in ministerial expenditures
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
RMI Policy Issues THE DECREMENT MANAGEMENT PLANNING PROCESS
54
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
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
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
RMI Policy Issues THE DECREMENT MANAGEMENT PLANNING PROCESS
56
‘DRAFT’ SURPLUS
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
RMI Compact Trust Fund
OBSERVATIONSRecent 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
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
RMI Compact Trust Fund
58
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
RMI Compact Trust Fund
59
slideGraduate School USAPacific Islands Training Initiativewww.econmap.org
RMI Compact Trust Fund
60
$557m
slide
Questions or Comments?JEMFAC, August 2014
61
Graduate School USA, Pacific & Virgin Islands Training Initiatives