Remengesau: Palau has been miscategorized as high-income economy
Palau President Tommy Remengesau
Palau has been unable to receive the level of foreign assistance it needs due to its inaccurate high-income status that needs to be corrected, Palau President Tommy Remengesau said.
With a projected GDP of $283.99 million in 2018, Palau is on the World Bank's list of high-income economies, a term often interchanged with "first world."
"The truth is, Palau's high-income categorization is, in many ways, unrealistic. It does not match the facts on the ground, or reflect our tremendous vulnerability as a small economy," Remengesau said during the United Nations General Assembly General Debate on Sept. 23.
Remengensau, who is capping his two-term presidency this year, said the incorrect listing "has to be addressed, because the current rules deny us help we desperately need."
Palau receives annual grant assistance under the Compact of Free Association with the United States. In 2018, the U.S. Congress authorized the 2010 Compact Review Agreement, which includes the deferred payment of over $120 million in Compact grants.
"Due to the renewed economic assistance terms of the Compact, it is projected that Palau’s Compact Trust Fund will achieve its original objective of replacing Compact assistance beyond 2044," according to Asian Development Bank.
Palau joined ADB in 2003. The young nation was classified as an ADB developing member country in December 2005. "Since 2005, ADB has committed loans totaling $84.8 million, a grant of $0.2 million, and technical assistance worth $3.8 million for Palau, according to ADB.
ADB projected Palau’s economy to contract by 9.5 percent in 2020 and 12.8 percent in 2021.
"The unified response from the international community should extend to our small island circumstances. This means access to concessional finance, and to innovative financial support, so that we too can prepare to recover from the economic crisis that the pandemic has brought," Remengesau said. "To rebuild the fiscal space for investing in sustainable development that the pandemic has wiped out."
Palau, whose economy is fueled by tourism, closed its borders at the onset of the Covid-19 pandemic. It is among the very few countries that have dodged the pandemic, which has triggered an economic carnage around the world.
"We have been fortunate to remain free of Covid-19 cases. But we are certainly not free of the consequences of this pandemic. Sometimes we hear people say that health is more important than money, and that is certainly true," Remengesau said.
"This pandemic has put Palau into a level of isolation we have not known for many, many years. We struggle with disruptions to supply chains for food and essential medicines. We struggle to connect patients with life-saving medical treatment, for which we previously relied on off-island providers in larger countries.
"We struggle to keep families united, to keep college students in school, and to keep family breadwinners working. Private sector unemployment is approaching 50 percent, and it will take years to recover what we have lost in months," the president added.
In July, ADB extended a $20 million loan to Palau to help the nation prepare for the Covid-19 crisis and respond to its impact on the economy.
"While Palau remains free of Covid -19 as of July 29, ADB’s program will help the government upgrade the country’s health sector by financing the purchase of ventilators for Belau National Hospital, establishing a Covid-19 hotline for public inquiries, and funding overtime and hazard pay for frontline health workers," ADB said.
"The program will also help implement the government’s economic stimulus package, which includes the provision of concessional loans to local businesses; benefits for the unemployed and assistance finding temporary work in areas such as agriculture, the environment, and elderly care; support for free pre-school and childcare for lower income families, which will particularly benefit women; and subsidies for utilities such as electricity and water."