ASIAN DEVELOPMENT BANK MONEY GEARED TO REFORM, STABILIZE MARSHALL ISLANDS

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MAJURO, Marshall Islands (November 24, 2000 – Marshall Islands Journal)---The RMI and the Asian Development Bank are now negotiating a loan of between $8 and $12 million that will be used to help the government out of its short-term money crisis, while implementing longer-range reforms to improve the RMI’s financial situation.

ADB program officer Tilak Sen last week led a "fact-finding" mission for the loan, and told the Journal the plan is to improve "the whole financial sector" by assisting the government with reorganization and focusing on long-term plans such as building a government trust fund to stabilize the government’s financial situation.

While it normally takes up to 18 months for the ADB to approve and process a loan, "we hope to deliver it in six months," he said, with a target of March 2001.

Both Sen and Foreign Minister Alvin Jacklick confirmed that there will be no further reductions in force (RIF) as part of the new reform loan.

The ADB is not pushing the loan, Sen said. "We’re trying to help the government implement its own priorities for good governance and improved financial management," he said.

The loan is expected to be in the $8 to $12 million range, depending on the need, he added. "In the past, the RMI spent first. This time, the goal is to save first." A key emphasis of the loan package is developing the RMI’s trust fund and promoting the private sector.

"In a small economy, you can’t just turn the switch and the private sector takes over," he said. "It doesn’t happen. It takes time. But the government is faced with budget shortages and high expectations of the public." It’s impossible to suddenly pull the government out of services: "The economy would collapse," he said. But at the same time, the government doesn’t have the money to keep operating at this level, he added.

The private sector needs to cooperate, as well, Sen said. When taxes dropped from 12 to five percent over two years ago, "prices didn’t drop and tax collections didn’t drop and tax collections didn’t rise."

"The government says it wants to turn things around," he said. The loan will focus efforts on what Sen described as a "re-allocation of priorities" to "make the government more efficient." The trust fund plan aims to build the fund over a 15 year period so that "it is big enough to take care of basic government services," he said.

Jacklick indicated that while the loan might be seen as requiring "sacrifices," the long-term benefit of developing a stabilized and transparent financial management system in the Marshall Islands far out-weighed short-term impacts of a reform plan.

The Marshall Islands Journal, Box 14, Majuro, Marshall Islands 96960 E-mail: journal@ntamar.com  Subscriptions (weekly): 1 year US $87.00; international $213.00 (air mail).

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