A 20-year funding deal for the Pacific island state runs out at the end of 2023, and the first round of talks on a new accord took place this week.

After a first "positive" round of discussions in the Marshall Islands, chief negotiators said they hoped to have an agreement "to sign by the end of September 2022."

Although a sovereign country, the Marshall Islands -- with a population of just 60,000 -- depends on the United States for an estimated 40 percent of its budget.

In return, the United States has been able to establish a series of strategically vital military facilities -- ranging from a missile range to naval facilities.

Similar agreements with the Federated States of Micronesia and Palau are also due to be renewed.

The three island nations cover an area of the Pacific larger than the continental US.

Washington sees the extension of funding packages under compacts of free association as a hedge against expanding Chinese diplomatic influence in the Pacific island region.

In addition to extending US funding support, Marshall Islands leaders want Washington to address issues at the Kwajalein missile range and other facilities.

Dozens of nuclear weapons tests have left a number of atolls with extreme radiation levels, and continue to cause health problems for many islanders.

Majuro also wants to bring climate adaptation and mitigation measures into the agreement.

"There is much work to be done, and we are optimistic our talks will be completed in a timely manner with good results for all," said Joseph Yun, President Joe Biden's special envoy.

The Marshall Islands were a United Nations Trust Territory of the US from shortly after World War II until 1986 when the first Compact of Free Association came into effect.

Parliament Speaker Kenneth Kedi, who is a member of the Marshall Islands negotiating team, said he is optimistic about reaching a deal.

"If Washington addresses the key issues, we'll sign tomorrow," he said.

In the current fiscal year budget, Compact grants and federal programs for education, health and other activities amount to over $100 million out of a $242 million budget.

The next round of in-person talks is scheduled to be held in Washington, DC in late July.