slide rmi economic review jemfac, august 2014 graduate school usa, pacific & virgin islands...

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RMI Economic ReviewJEMFAC, August 2014

Graduate School USA, Pacific & Virgin Islands Training Initiatives

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RMI Presentation

Economic Performance

Economic Policy

Compact Trust Fund

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REAL GDP and Per Capita GDP

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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

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Sources of Growth

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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

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Employment by Sector

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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

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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

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1.4% avg

-2.6% avg

1.7% avg

-2.3% avg

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Govt Revenues vs Expenditures

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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

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Govt Employment & Wage Bill

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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

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External Debt

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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

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FY11-FY13 Subsidies & Capital Transfers to SOEs

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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

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Outmigration

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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

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Recently rolled out at Development Partners Meeting

RMI Policy Initiatives

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NATIONAL STRATEGIC PLAN

DECREMENT MANAGEMENT PLAN (DRAFT)Incorporates elements of: Comprehensive Adjustment Program (CAP), Tax and Revenue Reform and Modernization (TRAM) and SOE Reform

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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

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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

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RMI Policy Issues

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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

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RMI Policy Issues

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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

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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…

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RMI Policy Issues THE DECREMENT MANAGEMENT PLANNING PROCESS

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RMI Policy Issues THE DECREMENT MANAGEMENT PLANNING PROCESS

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Adjustment Options: Expenditure Compression (Day One)

reduction in ministerial expenditures

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RMI Policy Issues THE DECREMENT MANAGEMENT PLANNING PROCESS

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RMI Policy Issues THE DECREMENT MANAGEMENT PLANNING PROCESS

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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

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RMI Policy Issues THE DECREMENT MANAGEMENT PLANNING PROCESS

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‘DRAFT’ SURPLUS

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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).

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RMI Compact Trust Fund

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RMI Compact Trust Fund

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RMI Compact Trust Fund

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$557m

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Questions or Comments?JEMFAC, August 2014

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