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MAJURO, RMI (May 10, 2002 – Marshall Islands Journal)---RMI’s economy grew slightly in 2001 and the trend will continue in 2002 largely as the result of increased (U.S.-Marshall Islands) Compact (of Free Association) funding in the last two years of the funding package, according to a recently released Asian Development Bank report entitled, "Outlook 2002: Economic Trends and Prospects in Developing Asia."

The ADB estimated that revenues grew by 13 percent last year, while expenditures rose just two percent, giving the RMI a budget surplus in 2001, a development that "marks a continuation of recent trends."

But the ADB noted that "the surplus was required to meet large principal (debt) repayments that peaked in fiscal year 1999 at $42 million and were estimated at $25 million in FY 2001."

Imports continued to outweigh exports by a large margin. The RMI brought in about $60 million worth of goods in 2001, while it exported just $8 million, the ADB said.

"The pace of growth in 2002 will be about the same as in 2001," said the ADB report, adding that the outlook for 2003 "will depend upon Compact negotiations."

The ADB reported that the RMI receives about $35 million in direct funding assistance annually from the U.S. that has created heavy economic dependence.

"This dependence has inhibited the development of the fundamentals for economic growth, from education attainment to entrepreneurial drive," the ADB said.

"Autonomous expansion of the private sector is very unlikely. Developments in the public sector, notably the future level of U.S. funding, will continue to drive the economy over the medium term."

Because of the uncertainty about the outcome of the negotiations for future Compact funding, government spending needs to be kept to long-run sustainable levels, the ADB said. But, the ADB reported, the current FY2002 budget provided for a nearly 10 percent increase in RMI spending, from $55 million to $59 million.

The ADB concluded its country assessment by commenting that while large-scale movement of Marshallese to the U.S. tends to encourage the most-qualified people to leave, "the option at least provides a safety valve and safeguards the quality of life for the remaining Marshallese, even if a large contraction in the public sector becomes inevitable."

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

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