1. November 2, 2015 Presented by Jermy Mudong and Sohs John
Medium Term Expenditure Framework Department of Finance & Administration
November 2, 2015
Presented by Jermy Mudong and Sohs John

2. Outline of the Presentation
Progress towards sustainable economic development
Fiscal Challenges
Strategic Development Plan
Budget Process

3. PROGRESS TOWARDS SUSTAINABLE ECONOMIC DEVELOPMENT
Section 1
PROGRESS TOWARDS SUSTAINABLE ECONOMIC DEVELOPMENT

4. Real GDP $millions

5. Real GDP Growth Sector FY2013 FY2014 Construction -25.9% -40.5% Total
Agriculture
+0.8%
+2.6%
Fishing
-14.7%
-1.8%
Construction
-25.9%
-40.5%
Hotels & Restaurants
-3.4%
-7.5%
Government Services
-1.3%
-2.5%
Total
-3.6%

6. FSM Policy Response:
Tourism
– FSM has included $1.9 million from domestic revenue to fund the State Tourism Investment Plans in the FY2016 Budget,
requesting $1.9 million matching funding from U.S Compact grant
Infrastructure
- $ 12 million appropriated for State Priority Infrastructure projects in FY2015 and in FY2016 Budget
-Updated Infrastructure Development Plan to release withheld U.S compact funds

7. Infrastructure Spending ($m)

8. Section 2
Fiscal Challenges

9. Fiscal Autonomy
The States make budget and spending decisions independently;
Budget decisions on Compact funding are made in consultation with the national government and U.S government.
The National Government increasingly provides funding to the States.

10. Fiscal Challenge
$Million

11. Overall Fiscal Balance ($m)
$Million

12. State Fiscal Gap in 2024 ($m)
2023
Grants
2024
Trust Fund Interest
Budget shortfall
Chuuk
39.1
17.4
-21.7
Kosrae
11.2
5.4
-5.8
Pohnpei
26.1
14.3
-11.8
Yap
16.8
9.6
-7.2
National
1.4
7.4
+6.0
Total
94.5m
54.1m
40.4m

13. Strategic Development Plan
Section 3
Strategic Development Plan
“Achieving Economic Growth & Self-Reliance”.

14. SDP 2004 - 2023 Outcome of the 3rd Economic Summit (2004)
Key strategic objectives:
Stability & security
Improved Enabling Environment for Economic Growth
Improved Education and Health Status
Assured Self-Reliance and Sustainability

15. 2023 Action Plan
Takes SDP and breaks into 3-year cycles of actions & reforms
Focus is to grow the economy through the Key sectors of Tourism, Agriculture, Fisheries & Energy
Contains a 3 year Action Plan Matrix
Contains a Results Framework

16. Section 4
Budget Process

17. SDP Financial Management Objective
Responsible fiscal policies that support financial stability and economic development
Adoption of Best Practices in the Transparency of Fiscal Management
To Enhance Accountability in the Public Sector
Improved Public Sector Management and Resource Allocation
Building Public Sector Capacity
Transformation of Public Sector Enterprises (PSEs)

18. Budget Process Develop Budget Call and Budget Guidelines
Prepare consolidated budget for EBRC budget review
Prepare Recommended Budget for transmittal to Congress
Congress appropriates

19. Long Term Fiscal Frameworks
Completed by the five governments in 2013
The frameworks go out to 2023 and are based on a 3 year budget periods
The next review of the LTFF is for the period FY2017 – FY2019
Planning for this update has began

20. National Government Policy Options
Balance between;
spending to stimulate economy
investment for the Future

21. National Government Burden Sharing
FY2012
FY2013
FY2014
FY2015
FY2016
Change in grant formula
4.0
8.0
Project Management Unit
1.0
0.4
Education
2.3
3.0
5.9
7.4
Infrastructure
2.2
1.3
12.3
10.3
Congress Regional Projects
3.4
6.5
10.0
5.6
Judiciary
0.3
State Tourism Development
1.9
Change in tax revenue formula
4.8
Total
8.1
10.9
19.6
33.1
38.7

22. FSM Trust Fund ($m)

23. Overall Fiscal Balance ($m)