The Commonwealth of the Northern Mariana Islands, a U.S. territory, “is at risk of a severe fiscal crisis,” according to a U.S. Government Accounting Office report.
The CNMI had $114 million of debt outstanding as of September 2020, much of it bond debt, according to its most recent audited statement. The government at that time had a net pension liability of $470.4 million.
These figures compare to a fiscal year 2020 gross domestic product of $939 million.
The GAO report said, “CNMI officials told us they are uncertain how they will continue to make expected debt service and pension fund payments.”
The CNMI consists of 14 islands in the western Pacific Ocean that extend from 20 miles to 400 miles north of Guam and 3,300 miles west of Hawaii. They are at about the same latitude as northern Vietnam.
CNMI’s economy is largely dependent on tourism. While it had about 660,000 visitors in 2017, that declined to 12,700 in 2021, and recovered to a still depressed 96,500 in 2022.
A strong typhoon hit the islands in 2018 and the largest casino in the territory closed in 2020, three years after it opened.
The government’s pension fund applied for bankruptcy in 2012 and a U.S. District Court filed a settlement agreement the following year requiring the government to make minimal annual payments to the pensions.
The islands’ population of 47,300 in 2020 was 12% less than its 2010 level.
Frankie Eliptico, a spokesman for Gov. Arnold Palacios, said Palacios, who assumed office six months ago, is taking strong action to address the government’s financial problems. He has terminated hundreds of government employees hired using American Rescue Plan Act of 2021 funding. His government has submitted a revised budget for the remainder of the fiscal year.
Palacios plans to make other reductions in the government workforce in the coming weeks, Eliptico said, and is increasing oversight and accountability for the use of federal and local funds.
“Although the commonwealth is in crisis, we cannot continue to operate only in crisis mode, with short-term thinking,” Palacios said recently to the Saipan Chamber of Commerce. “We must make decisions today that are mindful of the future, driven by data and a shared vision of what a thriving and sustainable economy means for our community.”
According to 2020 figures, 75% of public debt is held by the central government and 25% by the Commonwealth Ports Authority. None of the debt is current rated.