Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698746750361.pdf (Micronesia, Federated States of)
TWELFTH CONGRESS OF THE FEDERATED STATES OF MICRONESIA FIRST SPECIAL SESSION, 2001 C.B.

NO.
____12-35____ A BILL FOR AN ACT To authorize the FSM to borrow approximately $12,000,000 from the Asian Development Bank and relend approximately $8,250,000 to the States for the purpose of funding private sector development programs and projects; to authorize a future appropriation of up to $12,000,000 for repaying the amounts borrowed; to transfer funds presently in the National Government Employee's Early Retirement Fund to the new External Debt Management Fund created by section 667 of title 55 of the Code of the FSM; and for other purposes.
BE IT ENACTED BY THE CONGRESS OF THE FEDERATED STATES OF MICRONESIA: 1 2 3 Section 1.

Definitions As used in this act: (1) "External Debt Management Fund" means the fund created by 4 section 667 of title 55 of the Code of the Federated States of 5 Micronesia ("FSM").
6 (2) "Trust Account" means the trust account created in the name 7 of a State pursuant to the existing Financing Agreement between the 8 National Government and the State with respect to the Public Sector 9 Reform Program loan from the Asian Development Bank (the "Bank").

10 Section 2.

Authorization.


The President (the "President") of the 11 Federated States of Micronesia (the "FSM") is hereby authorized to 12 borrow money from the Bank and relend a portion thereof to the States 13 as provided hereinafter.

The borrowing shall be by way of two loans; a 14 program loan and a project loan.

15 16 Section 3.

Amounts.

(1) The total amount to be borrowed from the Bank is the CBL 12-32 C.B.

NO.
NO.

____12-35____ 1 equivalent in SDRs (Special Drawing Rights) of the Bank, as of such 2 point in time as the Bank and the President shall agree, of up to 3 approximately $12,017,158.

Of that amount, $4,000,000 shall be lent 4 under the program loan and $8,017,158 shall be lent under the project 5 loan.
6 (2) From the proceeds of the program loan, the National 7 Government will relend to the State Governments, and/or retain for its 8 own use, the following approximate amounts, subject to the rate of 9 exchange of the SDRs at the time of disbursement: 1st Tranche 2nd Tranche Total (a) Chuuk $500,000 $500,000 $1,000,000 (b) Kosrae 250,000 250,000 500,000 (c) Pohnpei 450,000 450,000 900,000 (d) Yap 300,000 300,000 600,000 (e) Natl.

Gov.
Gov.

500,000 500,000 1,000,000 (f) Total 2,000,000 2,000,000 4,000,000 (3) From the proceeds of the project loan, the National 18 Government will relend to the State Governments, or retain for its own 19 use, the following approximate amounts, subject to the rate of exchange 20 of the SDRs at the time of disbursement: (a) Chuuk (b) Kosrae (c) Pohnpei (d) Yap $ 1,779,920 1,261,080 993,980 1,203,540 (e) Natl.

Gov.

$2,778,638 2 of 7 C.B.

NO.


____12-35____ 1 (f) Total 8,017,158 2 3 Section 4.

Financial terms.
(1) The program loan from the Bank and each of the loans 4 thereunder by the National Government to the States shall: 5 (a) provide for disbursement in two separate drawdowns or 6 "Tranches"; 7 (b) have an eight (8) year grace period for the repayment 8 of principal; 9 (c) bear interest at the rate of 1% per annum during the 10 grace period and 1.5% per annum thereafter; and 11 (d) provide for the repayment of principal over a sixteen 12 (16) year period commencing at the end of the grace period.
13 (2) The project loan from the Bank and each of the loans 14 thereunder by the National Government to the States shall: 15 (a) have an eight (8) year grace period for the repayment 16 of principal; 17 (b) bear interest at the rate of 1% per annum during the 18 grace period and 1.5% per annum thereafter; and 19 (c) provide for the repayment of principal over a twenty- 20 four (24) year period commencing at the end of the grace period.

21 Section 5.

Use of proceeds.


The proceeds of the loan will be 22 used for the exclusive purpose of facilitating development of the 23 private sector in the FSM, as more fully set forth in the loan 24 agreement between the FSM and the Bank.

25 Section 6.

Relending conditions.

3 of 7 C.B.

NO.
____12-35____ 1 (1) Relending of loan proceeds to a State shall be by way of 2 Program and project Relending Agreements between the National 3 Government and the State which, taken together shall: 4 (a) place the foreign exchange risk on the State until the 5 estimation and transfer process called for in subsection (c) below, and 6 on the National Government thereafter; 7 (b) amend provisions relating to the Trust Account so as to 8 permit and require that Trust Account to be used, in conjunction with 9 the External Debt Management Fund, for repayment of the Public Sector 10 Reform Program Loan, the present program and project loans and possibly 11 other loans to the State; 12 (c) provide for annual estimation of the amount 13 conservatively estimated to be needed as a sinking fund for repayment 14 of all loan proceeds advanced to the State since the last such 15 estimate, followed by transfer of the amount so estimated from the 16 Trust Account to the External Debt Management Fund; 17 (d) provide for disbursement to the State of funds 18 remaining in the Trust Account after five years if and when all loans 19 to be repaid from the Trust Account have been disbursed; 20 (e) provide that from, and after completion of, each annual 21 estimation and transfer process called for in subsection (c) of this 22 section, the National Government shall bear the risk that funds in the 23 Trust Account and the External Debt Management Fund may not be 24 sufficient to repay all the loans intended to be repaid therefrom and 25 the State shall be released from liability for any such shortfall 4 of 7 C.B.
NO.

____12-35____ 1 except as otherwise expressly provided in the Relending Agreements; 2 (f) contain such other provisions as the President or the 3 Bank may require; and 4 (g) are specifically and properly authorized by the 5 Legislature of the State.
6 (2) Except as provided herein, or in the loan agreements with 7 the Bank, the form of the Relending Agreement with respect to a 8 particular loan from the Bank, shall be the same for all States so as 9 to assure that no State receives preferential treatment over any other 10 State.

11 12 Section 7.

Delegations.
(1) While the President shall remain involved and informed, he 13 may delegate: 14 (a) to the Secretary of Finance and Administration, the 15 authority to negotiate the loan agreements with the Bank, the Relending 16 Agreements with the States, and other relevant documents; 17 (b) to the Secretary of Finance and Administration, the 18 authority, to sign any such documents on behalf of the National 19 Government; 20 (c) to the FSM's representative on the Board of the Bank in 21 Manila, the authority to sign agreements between the Bank and the 22 National Government on behalf of the FSM; and 23 (d) to such officials as the President deems appropriate, 24 the authority to administer various portions of the programs and 25 projects funded by the loans from the Bank.
5 of 7 C.B.

NO.

____12-35____ 1 (2) The right to delegate the performance of an act to a person 2 includes the right to ratify the performance of that act by that person 3 after the fact.

4 5 Section 8.

Appropriation of loan proceeds.


(1) If and to the extent that such an appropriation is 6 necessary, all sums directly or indirectly received as proceeds of the 7 project loan from the Bank are hereby appropriated for the purpose of 8 funding private sector development projects to the extent and in the 9 manner specified in the project loan agreement.

Such funds may not be 10 obligated until received from or made available by the Bank.
11 (2) If and to the extent that such an appropriation is 12 necessary, all sums directly or indirectly received as proceeds of the 13 program loan from the Bank and intended for the use of a State are 14 hereby appropriated for the purpose of funding programs or projects in 15 that State to the extent and in the manner specified in the program 16 loan agreement.
Such funds may not be obligated until they have been 17 received from or made available by the Bank and until their use has 18 been further specified through appropriation legislation in the State.

19 (3) Proceeds of the program loan which are intended for the 20 use of the National Government shall be subject to appropriation by the 21 Congress of the FSM in one or more separate appropriation acts.

22 Section 9.

Repayment authorization.


The sum of up to $12,000,000 23 is hereby authorized to be appropriated in future years for repaying 24 the loans from the Bank if and to the extent that the State Trust 25 Accounts referred to in section 5 of this act and the External Debt 6 of 7 C.B.

NO.

____12-35____ 1 Management Fund are insufficient to repay the loan.

2 3 Section 10.

Allotment and management of funds and lapse date.


(1) All funds appropriated by this act shall be allotted, 4 managed, administered, and accounted for in accordance with applicable 5 law, including, but not limited to, the Financial Management Act of 6 1979.

The allottee shall be responsible for ensuring that these funds, 7 or so much thereof as may be necessary, are used solely for the purpose 8 specified in this act and that no obligations are incurred in excess of 9 the sum appropriated.
10 (2) The authority of the allottee to obligate funds appropriated 11 by this act shall not lapse.

12 Section 11.

This act shall become law upon approval of the 13 President of the Federated States of Micronesia or upon its becoming 14 law without such approval.

15 16 17 Date: _____________ Introduced by: __________________________ 18 Joseph J. Urusemal (by request) 7 of 7