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US proposes $6.5 billion in economic aid for Compact states over 20 years

Proposed amount might be lower than expected

By Mar-Vic Cagurangan

For the next 20 years, the U.S. government plans to commit $6.5 billion in fresh economic assistance to freely associated states under the Compacts of Free Association.

The compact nations Palau, the Federated States of Micronesia and the Marshall Islands have sought increased packages in exchange for ceding their air, space and territorial waters to the U.S., hence accepting broader roles in regional defense.

The Biden administration’s proposed allocation, however, is slightly lower than the total amount provided to compact states under the expiring 20-year economic package.

In a February 2022 report, the Government Accountability Office estimated that the U.S. Department of the Interior “is scheduled to have provided, in total, $3.7 billion to FSM and $2.5 billion to RMI by 2023 and $803 million to Palau by 2024.”

In total, the three compact states received $7 billion over 20 years.


The U.S. financial assistance provided under the compacts is scheduled to end in September for the FSM and the Marshall Islands and September 2024 for Palau.

The U.S. Department of State earlier this year signed separate memorandums of understanding with Palau, the Federated States of Micronesia and the Marshall Islands, pledging to renew the expiring provisions of the compact.

“Negotiations on the expiring provisions of the Compacts of Free Association continue, underscoring the importance of these bilateral relationships,” according to an announcement from the U.S. Department of the Interior today.

“The administration supports renewing the funding of our Compact of Free Association relationships,” DOI said. “The administration intends to submit a legislative proposal to Congress upon completion of these negotiations later this year,” the department added.


Washington has yet to disclose details of the tentative agreements reached with Palau, the Marshall Islands and the FSM.

FSM President David Panuelo claimed his negotiating team has clinched a $7 billion pledge from the U.S. negotiators.

The amount Panuelo has floated, however, is larger than the total allocation the Biden administration is proposing for the three compact states.

“Continuing decisions established in the FY 2023 budget, the 2024 budget proposal seeks $6.5 billion in economic assistance over 20 years to be provided through a mandatory appropriation at the Department of State, and language calling for continued implementation of the Compacts at the Department of the Interior,” DOI said.


The compacts allow the U.S. to operate armed forces in Palau, the FSM and the Marshall Islands and to demand land for operating bases and bars other foreign militaries without U.S. permission. The U.S. in turn becomes responsible for the defense of compact states.

"The United States remains committed to its long-standing partnerships with the governments and the people of the freely associated states as we work together to promote a free and open Indo-Pacific," DOI said.

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