Chapter

FEDERATED STATES OF MICRONESIA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2004
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(Position as of December 31, 2003)
Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: June 24, 1993.
Exchange Arrangement
CurrencyThe currency of the Federated States of Micronesia is the U.S. dollar.
Exchange rate structureUnitary.
Classification
Exchange arrangement with no separate legal tenderThe authorities do not buy or sell foreign exchange. Foreign exchange transactions are handled by the two commercial banks that are authorized foreign exchange dealers and are regulated by a statutory banking board. The banks buy and sell foreign exchange at the rates quoted in international markets.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketForward transactions may be conducted through commercial banks without restriction.
Arrangements for Payments and Receipts
Prescription of currency requirementsNo.
Payments arrangements
Regional arrangementsMicronesia participates in PACER and PICTA.
Administration of controlNo.
International security restrictionsNo.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)No.
Controls on exports and imports of banknotesNo.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadYes.
Accounts in domestic currency held abroadThe U.S. dollar is used as domestic currency, and no distinction is made between accounts in U.S. dollars held domestically and those held abroad.
Accounts in domestic currency convertible into foreign currencyThe U.S. dollar is used as domestic currency and balances may be converted into foreign currency without restriction.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measuresImporters must obtain a business license.
Negative listImports of certain products are prohibited for environmental, health, safety, or social reasons.
Import taxes and/or tariffsImport duties are levied on an ad valorem or specific basis as follows: (1) 25% on cigarettes (50% on other tobacco products), carbonated nonalcoholic beverages, drink mixes and preparations, coffee, tea, beer, malt beverages, wines, perfumes and articles containing perfumes (such as sachets), cosmetics, toiletries (including cologne and other toilet waters), all skin and hair applications (such as lipstick, pomades, and powders), and any other preparations not having medicinal properties; (2) $10 per U.S. gallon on spirits and distilled alcoholic beverages; (3) $0.05 per U.S. gallon on gasoline and diesel fuel; (4) 3% on foodstuffs (except for fresh citrus fruit, for which the duty is 25%); (5) 100% on laundry bar soap; and (6) 4% on all other products. The ad valorem duties are based on the c.i.f. value of the goods.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirements
Preshipment inspectionThe Department of Health, Education, and Social Affairs conducts preshipment inspections of foodstuffs.
Export licensesExports are not subject to licensing requirements, taxes, or quantitative restrictions. The purchase and export of copra and dried coconut meat yielding coconut oil are conducted solely by the Coconut Development Authority.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsYes.
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating natureAll of these transactions are regulated.
Bonds or other debt securities
Sale or issue abroad by residentsYes.
Controls on derivatives and other instrumentsNo.
Controls on credit operationsn.r.
Controls on direct investment
Inward direct investmentForeign investors must obtain an application from the federal government and submit it for review and action to the Foreign Investment Board of the state in which the business will be located. They must also obtain a license from the federal government to engage in business or to acquire an interest in a business in the Federated States of Micronesia. If a foreign investor wishes to conduct business in more than one state, an application for each state must be obtained from the federal government and submitted to the Foreign Investment Board of each of the states in which the business will be located and operated. Priorities for foreign investment are reviewed by the federal and state authorities from time to time.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase locally by nonresidentsForeign investment in the real estate and construction sectors is prohibited in accordance with the laws prohibiting land ownership by foreigners. Foreign investors normally obtain long-term leases (usually up to 55 years with an option to renew for another 44 years) for land needed for their business.
Sale locally by nonresidentsYes.
Controls on personal capital transactionsn.r.
Provisions specific to commercial banks and other credit institutions
Lending to nonresidents (financial or commercial credits)The statutory lending limit to any person is set at 20% of capital.
Investment regulations
Abroad by banksDomestic banks are prohibited from investing in the stocks of any corporation, domestic or foreign.
In banks by nonresidentsForeign investment in domestic banks may not exceed one-third of available shares.
Provisions specific to institutional investorsn.a.
Other controls imposed by securities lawsn.a.
Changes During 2003
No significant changes occurred in the exchange and trade system.

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