Japan, ADB assisting Micronesia in improving budget management
18 Sep '07
2 min read
The amended Compact of Free Association, which took effect in 2004, requires quarterly financial and performance reports and gives the United States the right to withhold or suspend funds. The 2023 scheduled end of the compact has focused attention on the need for self-sufficiency.
Assessments by ADB, the United States Government Accountability Office and the International Monetary Fund have identified unsustainable fiscal management and failure to implement key development priorities as major impediments to achieving self-sustaining economic growth.
“Aid flows, in combination with a lack of capacity, have contributed to some poor habits going unchecked – limited financial responsibility, limited monitoring of performance, reliance on the public sector, substitution of aid for raising domestic revenues, and limited demand for policy change. ADB is supporting FSM in turning around these practices,” said Emma Ferguson, an Economist in ADB's Pacific Department.