The Asian Development Bank (ADB) will assist the Federated States of Micronesia (FSM), a federation of four states located in the western Pacific Ocean, in improving budget and planning processes to achieve self-sustaining economic growth, said the bank on Tuesday.
The so-called Strengthening Economic Management and Planning Project will be implemented over a three-year period at a budget of 475,000 U. S. dollars, said ADB in a press release. The Federated States of Micronesia will provide in kind support equivalent to the balance.
The assistance was in response to the request made by FSM to ADB for helping national and state governments strengthen their execution of performance-based budgeting under its Strategic Development Plan 2004-2023.
The Strategic Development Plan identifies priority activities needed to generate the growth that will enable the country to achieve self-sustainability by 2023. The ADB-backed assistance will address the issues of governance and capacity in financing and implementing the Strategic Development Plan by developing long- term sustainable transition plans, boosting capacity in performance budgeting and linking budgeting and planning processes.
FSM relies heavily on foreign aid, particularly from grants provided by the U.S. government under the Compact of Free Association approved in 1986. Overall public expenditure accounts for around 60 percent of gross domestic product, there is limited private sector activity and the export base is narrow.
Assessments by ADB, the U.S. Government Accountability Office and the International Monetary Fund have identified unsustainable fiscal management and failure to implement key development priorities as major impediments for the island country 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.
Micronesia consists of 607 islands extending 2,896 kilometers across the Archipelago of the Caroline Islands in the Western Pacific Ocean.
Source: Xinhua
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