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Palau Finance official: We have no choice but to take out loans

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KOROR (Island Times/Pacnews) — Covid-19 pandemic has greatly affected Palau,  Minister of Finance Elbuchel Sadang said, adding, “we have no choice but to get loans to help us….”

“We are not the only ones getting loans during this time,” stated President Tommy Remengesau. He added that many other countries  are also seeking loans to help their countries ride out the pandemic.

Leaders of the Pacific are asking banks and donor countries to assist through loan forgiveness. “It has been done before and they can do it again,”  Remengesau said.

Responding to concerns that Palau is taking on more loans than it can afford to pay, Finance Minister Sadang said even if Palau’s loan reaches 80% of its GDP, it can still pay for it.

He said the $30 million loan Palau took out to build its Capitol was retired or paid in July of this year.

If Palau obtains the entire $60 million loan that its National Congress had authorized President Remengesau to seek, the total estimated payment of interest and principal each year of the old and new loans will be about $6 million.

Sadang believes that Palau can afford this payment, especially if it establishes “new policies” aimed at strengthening the island nation’s finances such as tax reform and debt sustainability.

Most of Palau’s loans are for revenue generating agencies and are not paid out of the national budget, the president said.

The airport improvement loan is paid by the airport, he added, while the loans for the Palau Public Utilities Corporation, the Belau Submarine Cable Corporation, and the Palau National Communications Corporation are backed by the government’s guarantee, but are paid for by the revenue generated by those agencies.

The $60 million loan that lawmakers authorized Remengesau to seek to mitigate the Covid-19 impact on the island nation has been pre-approved with the first tranche of $20 million already disbursed to Palau.

But the remaining $40 million requires policy changes before it can be remitted to Palau.

 The second tranche of $20 million requires the drafting and submission of fiscal policies.

The drawdown of the final $20 million requires the enactment of proposed fiscal policies.

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