1. The FSM is a small Pacific island country highly dependent on external aid, mainly U.S. grants.1 A renewed Compact Agreement with the United States (qCompactq) effective since FY20042 steadily lowers transfers to the FSM through FY2023. Thereafter, the FSM is expected to complement its domestic revenues with returns from its Compact Trust Fund and other savings. The new Compact has placed stricter rules on reporting, auditing, and the use of grants, which have proved difficult for the national and state governments to meet. As a result, about $100 million (34 percent of GDP) in grants have not been used, contributing to a contraction of the FSM economy in recent years.3However, if higher risk aversion and lower credit availability reduce overseas stock market returns, the FSM could face ... With net investment returns at 51a2 percent (instead of 6 percent) annually, the estimated fiscal surplus required toanbsp;...
|Title||:||Federated States of Micronesia: 2008 Article IV Consultation - Staff Report; and Public Information Notice on the Executive Board Discussion|
|Author||:||International Monetary Fund|
|Publisher||:||International Monetary Fund - 2009-01-01|