Government of the Federated States of Micronesia

Nena Asks Congress FSM Water Project Financing Agreement

PALIKIR, Pohnpei (FSM Information Service): August 12, 1997
– President Jacob Nena transmitted to Congress Speaker Jack Fritz on
July 28, 1997, a proposed legislation which seeks three changes to
the Water Project financing agreement whereby money is to be relent
from the FSM to a state and from the state to its utility company.

The first change is to have the FSM National Government be
responsible for paying the full loan outstanding if the Asian
Development Bank calls for an accelerated payment of the loan as a
result of a default of a state or states on its scheduled repayments
instead of penalizing individual states who are making the repayments
as scheduled. Originally, the Financial Agreement allows for the ADB
to accelerate or call for the full repayment of the loan balance if
one or more states defaulted, even though other state or states are
meeting their agreed repayment schedule.

The change was requested by Yap as a condition for its willingness
to participate in the project, Nena said.

The second amendment primarily clarifies what is already in the
Financial Agreement in the hope that it will provide some comfort for
Pohnpei State, which is balking at the provisions for securing loan
repayment, Nena said.

Finally, the third change reflects the extension of the grace
period for a state from five years to 10 years, but the grace period
for the utility companies remain at five years.