This Selected Issues paper examines the reasons for the poor initial performance of the Compact Trust Fund (CTF) of Micronesia and the issues related to the governance framework. The design and recent implementation of the CTF raise concerns that Micronesia will still face a difficult transition after U.S. aid ends in FY2023. The paper provides forecasts for the fund over the medium term. It also examines the business environment in Micronesia and identifies possible areas for improvement.
The staff report for the 2004 Article IV Consultation on the Federated States of Micronesia (FSM) focuses on economic developments and policies. Fiscal and structural reforms are needed for the FSM to achieve self-sufficiency. The large government sector will be increasingly unsustainable given coming declines in grants. Fiscal adjustment will need to comprise both expenditure cuts and revenue measures. Structural reform priorities should include improvements to the legal framework for land use, foreign investment, and lending.
International Monetary Fund. External Relations Dept.
In preparation for the 2003 IMF-World Bank spring meetings, the IMF Executive Board will review progress on the IMF’s efforts and plans to help poor countries further. The IMF Survey talked to Masood Ahmed, Deputy Director of the IMF’s Policy Development and Review Department, about this effort.
This 2002 Article IV Consultation highlights that the economic activity in the Federated States of Micronesia (FSM) is estimated to have slowed. Despite the use of the bump-up funds by some of the FSM’s four state governments to boost spending during FY2002, GDP is estimated to have grown only by 0.8 percent. The fiscal stimulus appears to have been mostly offset by an emerging fiscal crisis in Chuuk and a “wait and see” attitude of the private sector in the face of uncertainty associated with the new Compact of Free Association.
This paper reviews economic developments in the Federated States of Micronesia during 1994–97. Real GDP growth, which has been sluggish in recent years, contracted by 4 percent in FY1997. This mainly reflects a sharp reduction in government expenditures under the reform program implemented by the national and state governments since FY1996, the cornerstone of which is the reduction in workforce and wage levels of government employees. The 1996 official GDP data indicated that government services accounted for 42 percent of GDP, wholesale and retail trade for 22 percent, and agriculture, hunting, and forestry for 17 percent.
This paper analyzes recent economic developments in the Federated States of Micronesia. Real GDP grew by a modest 1 percent in 1995, well below the average growth rate recorded during 1991–94, according to tentative estimates prepared by the IMF staff. The overall fiscal balance of the national government has registered surpluses for the past several years. Total revenue and grants have increased, mainly reflecting higher nontax revenue from fishing license fees from Korea and Taiwan, Province of China, and higher non-Compact grants.
International Monetary Fund. Secretary's Department
The speeches made by officials attending the IMF–World Bank Annual Meetings are published in this volume, along with the press communiqués issued by the International Monetary and Financial Committee and the Development Committee at the conclusion of the meetings.