FSM 'faced with a fiscal cliff', President Simina says

Federated States of Micronesia (FSM) President Wesley Simina says his country could be staring down a "fiscal cliff" very soon if the US Congress does not approve its Compact of Free Association (COFA) agreement.

"If nothing works out, if the US Congress does not approve [COFA] in time, we're faced with a fiscal cliff," President Simina said.

"That means we will have to find different sources of funding...and that's not out there available immediately."

At the tail end of the 52nd Pacific Islands Forum Leaders Summit in Rarotonga, Wesley Simina told RNZ Pacific domestic issues, particularly US financing, were front of mind for him.

The FSM Congress had ratified the compact but the US congress also needed to approve it to push through funding.

"Our part is done. Our Congress has ratified it," he said.

Two weeks ago, he was hoping for US approval in a matter of days.

However, RNZ Pacific understands that still has not happened.

"We are dependent on US assistance, and they're having their own issues.

"So we're trying to make sure we can [make] do while they're working on our new Compact of Free Association.

"That's the treaty that takes care of our relationship with the United States."

The Marshall Islands and Palau have also signed a similar compact association deals with Washington.

However, it is not just the FSM's financial situation needing approval by the US Congress.

There are the billions of dollars pledged by President Joe Biden to Pacific Island Forum member states at this year's US-Pacific meeting and this year's one yet to make it to the front line due to the nation's debt crisis.

Simina said the US Congress understands just how urgent the financing matter is for Micronesia.

"What we understand is that the US Congress also understands that situation, and they're working very hard," he said.

While a stop gap is in place the funding available is slim.

A spokesperson for the FSM government told RNZ Pacific they appreciate the interim support from the United States while it awaits approval of The Compact of Free Association Amendments Act of 2023.

"As of now, the House Natural Resources Committee and the Senate Energy and Natural Resources Committee have approved the 2023 Compact and the 2023 Subsidiary Agreements at the Committee level.

"The bill approved by these two committees that would approve the US-FSM agreements is entitled 'The Compact of Free Association Amendments Act of 2023'"

"The House Natural Resources Committee and the Senate Energy and Natural Resources Committee have asked that the Senate and House Armed Services Committees include the text of this bill in the annual National Defense Authorization Act (NDAA), a bill that normally passes in Congress before the end of December every calendar year.

"The Biden Administration and the FSM Government are strongly urging that the Compact of Free Association Amendments Act of 2023 be included in the NDAA. The House and Senate conference process for the NDAA will take place over the next 2-4 weeks and we will know in that time frame whether the Compact Act is included in the NDAA.

They said while the Compact Act is pending, "the Congress has approved pro rata funding for sector grants at the FY 2023 level through 2 February 2024, as a part of the US Congress's continuing resolutions".

"This means that the FSM has a stopgap funding stream at the FY 2023 level for sector grants until the US Congress completes its consideration of The Compact of Free Association Amendments Act of 2023.

"While this is a lower amount than the funding the FSM would receive for sector grants once the new Compact amendments are approved, we appreciate this interim support from the United States," the spokesperson added.

Pandemic recovery

The FSM's new administration started in May 2023.

President Simina said that his government was still in the process of filling roles of ambassadors and officials, almost six months after the election.

Like the rest of the world, the Federated States of Micronesia is also in pandemic recovery mode.

"There's no question that the impact of Covid-19 was real for us economically and socially," Simina said.

But because of former president David Panuelo's quick action, Simina believes his nation was one of the "luckiest" in the Pacific.

"We took quick action in locking down our nation's borders. I was the Speaker then of the FSM Congress," he said.

Lockdown impacted FSM's economy, particularly with the loss of tourism.

Fortunately there was money set aside for a rainy day and the nation also had assistance from ADB and the US, Simina said.

"Right now, we're just continuing to make sure that tourists come back," he said.

'Our unity is our strength, prosperity'

National and regional unity is Simina's top priority for this term.

"Our unity is our strength and our prosperity," he said in his inaugural address.

"Trying to keep the ropes of unity, to keep tying up our states," he said.

Starting off internally, he wants unity between Pohnpei, Kosrae, Chuuk and Yap - the four states that make up FSM.

"We have to find the common grounds that will keep us together," Simina said.

Climate change is a "huge problem" and infrastructure is another issue that needs addressing, he noted.

Regional issues are also front of mind as Simina is the current chair of the Micronesia Presidents Summit which is made up of FSM, Kiribati, Nauru, Palau and the Marshall Islands.

"We have five governments to deal with. And being the chairman of the MPS, I am very mindful of that.

"So that kind of unity I want to also bring out to the Micronesian region as well," Simina explained.

All this talk of unity on the backdrop of Nauru ditching Pacific Islands Forum leaders in Cook Islands.

This, following discussions regarding the appointment process of the controversial incoming Forum secretary-general Baron Waqa.

Simina said he had not been party to any discussions around apologising to Nauru over what has been called a "misunderstanding".

"We're looking at our process moving forward into the future, for example the appointment of the next SG," Simina said.

He said strengthening the framework around the Suva Agreement has also been discussed.

"I'm not sure there was anything that went wrong with the appointment.

"But the process itself because of the special circumstances of the time...so they kind of rushed and put together something so that we know it's working properly.

"So that's exactly what happens. We were discussing how to strengthen to make sure that something like what happened before that happened again."