16 Dec 2010

Marshalls seeks extension of US compact funding

4:24 pm on 16 December 2010

The Marshall Islands is asking the United States to extend a long-term funding agreement which it says is vital to its viability.

The request is made as part of the Marshall Islands response to a five-year review of its Compact of Free Association with the US.

The Marshall Islands government says a trust fund established as a buffer for when US grant funding ends under the compact in 2023 is not doing very well.

It says the fund was also not fully invested during its first two years, which means it will fail to meet a requirement it be invested for 20 years before the Marshall Islands can use the money.

Our correspondent Giff Johnson says it has asked for the funding agreement to be extended to 2025 so there can be a smooth transition when US grant funding ends.

"Many reports now including US government reports and an International Monetary Fund report are saying that based on where the trust fund is now after five or six years that it will not come anywhere near to replacing US grant funding in 2023, which would put the Marshalls into an economic crisis."

Giff Johnson says the US provides an annual contribution of about 11 million US dollars to the trust fund.