IMF Executive Board Concludes 2016 Article IV Consultation with Tuvalu
IMF News, October 4, 2016
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Bibliographic details
- Published: October 4, 2016
Macroeconomic outlook
- Real GDP growth:
- 2015: 2.6 percent (estimated)
- 2016: 4 percent (projected) — "on account of several large infrastructure projects and recovery spending following Cyclone Pam"
- 2017: 2.3 percent (projected)
- Inflation (period average):
- 2015: 3.2 percent (remained steady)
- 2016: 3.5 percent (expected to rise slightly)
- 2017: 2.9 percent (projected)
- Assessment: "The macroeconomic outlook is stable." Recovery spending following Cyclone Pam contributed to near-term pickup.
Fiscal position and public finances
- Fiscal outcomes:
- 2015: "The budget achieved a substantial surplus" — fourth consecutive year of surplus.
- 2016: Fiscal position expected to turn into a small deficit and projected to remain in deficit over the medium term.
- Drivers of revenues (in percent of GDP):
- Revenue and grants: 2015: 123.5; 2016: 124.5; 2017: 113.3
- Revenue: 2015: 105.5; 2016: 91.7; 2017: 80.9
- Tax revenue: 2015: 19.4; 2016: 17.1; 2017: 17.3
- Fishing license fees: 2015: 60.9; 2016: 53.2; 2017: 43.0
- Grants: 2015: 32.9; 2016: 32.4
- Expenditure (in percent of GDP):
- Total expenditure: 2015: 86.8; 2016: 116.3; 2017: 127.3
- Current expenditure: 2015: 81.0; 2016: 86.6; 2017: 116.1
- Wages and salaries (of which): 2015: 31.9; 2016: 32.2; 2017: 36.1
- Special Development Expenditure: 2015: 6.2; 2016: 7.4; 2017: 9.2
- Overall balance (in percent of GDP):
- 2012: 9.3
- 2013: 26.3
- 2014: 36.3
- 2015: 7.2
- 2016: -2.7
- 2017: -4.2
- Fiscal buffers and funds (stocks in A$ million):
- Tuvalu Trust Fund: 2012: 131; 2013: 141; 2014: 144; 2015: 149; 2016: 151; 2017: 155
- Consolidated Investment Fund: 2012: 4.5; 2013: 12.2; 2014: 24.3; 2015: 30.8; 2016: 28.9; 2017: 26.2
- Tuvalu Survival Fund: 2015: 5.0
- IMF note: "With four years of budget surpluses, fiscal buffers have been rebuilt and remain at a comfortable level, even though expenditures have increased rapidly."
Balance of payments and reserves
- Selected items (in millions of Australian dollars, unless otherwise indicated):
- Nominal GDP: 2012: 38.5; 2013: 39.7; 2014: 43.5; 2015: 46.1; 2016: 48.1
- Current account balance: 2012: 6.6; 2013: 0.5; 2014: 8.0; 2015: 3.3; 2016: -1.8; 2017: 17.2
- Exports of goods: 2012: 1.2; 2013: 19.3; 2014: 7.6; 2015: -4.0; 2016: -5.7
- Exports of goods (percent of GDP): 2012: 19.9; 2013: 18.8; 2014: 19.2; 2015: 19.7; 2016: 20.1; 2017: 20.6
- Imports of goods (percent of GDP): 2012: -21.4; 2013: -32.2; 2014: -29.3; 2015: -33.6; 2016: -38.6; 2017: -39.9
- Current transfers (net): 2012: 21.2; 2013: 25.6; 2014: 14.9; 2015: 17.8
- Capital and financial account balance: 2012: -3.4; 2013: 8.7; 2014: -4.9; 2015: 2.1
- .TV domain license fees (component): 2012: 3.7; 2013: 4.4; 2014: 6.3
- Capital transfers (net): 2012: 4.7; 2013: 5.1; 2014: 5.8; 2015: 11.3; 2016: 8.6
- Gross official reserves (A$ million): 2012: 27.5; 2013: 37.9; 2014: 41.0; 2015: 46.4; 2016: 42.7; 2017: 41.3
- Reserves (in months of next year's imports): 2012: 5.4; 2013: 8.3; 2014: 7.1; 2015: 6.5; 2016: 6.1
- Debt indicators (in percent of GDP unless otherwise indicated):
- Gross public debt: 2012: 25.9; 2013: 57.2; 2014: 64.4; 2015: 58.2; 2016: 53.7; 2017: 44.3
- External debt: 51.8; 59.8; 54.5; 51.7
- Domestic debt: 4.6; 3.8; 0.0
Risks and vulnerabilities
- Identified risks to the outlook:
- Effects of climate change
- Volatility in fishing revenues
- Volatile global financial conditions that could affect distributions to the budget from the Tuvalu Trust Fund
- Structural challenges highlighted:
- Sustaining investment to mitigate the effects of climate change
- Strengthening fiscal frameworks
- Public enterprise reform
- Financial sector oversight
Executive Board assessment and recommendations
- Near-term view: Directors "noted that the near-term macroeconomic outlook is stable and growth is picking up, partly owing to recovery spending following Cyclone Pam."
- Commendations: Progress under the Policy Reform Matrix, 2012-15, and commitment to continue under the national strategy for sustainable development, 2016-2020.
- Fiscal recommendations:
- Sustain adequate fiscal buffers given revenue volatility.
- Exercise restraint on recurrent expenditure to sustain buffers and enhance debt sustainability.
- Adopt a medium-term fiscal framework that targets a small structural budget surplus to boost resilience.
- Continue seeking access to global climate change funding, with the assistance of development partners.
- Develop and incorporate disaster costs into budget planning.
- Public financial management and public enterprise reform:
- Improve public financial management, particularly the framework for capital budgeting.
- Public enterprise reform to improve corporate management and clearly define and price social services.
- Financial sector oversight:
- Banking commission should conduct a review of non-performing assets and on-site supervision of banks, in collaboration with external advisors.
- Exchange rate and competitiveness:
- "Directors welcomed the assessment that the exchange system is free of restrictions."
- Real exchange rate: 2005=100 series — 2012: 103.8; 2013: 102.1; 2014: 97.3; 2015: 91.9 — "in line with fundamentals."
- Recommendation: continue to implement the national development strategy to strengthen competitiveness.
- Statistics and technical assistance:
- Directors urged the authorities to make use of technical assistance to improve economic statistics.
Selected social and economic indicators (key levels)
- Population (2014): 9,893
- Poverty rate (2010): 26.3 percent
- Per capita GDP (2014 est.): US$3,827
- Life expectancy (2014): 66 years
- Main export: Fish
- Primary school enrollment (2006): 100 percent
- Key export markets: Fiji, Australia, Japan
- Secondary school enrollment (2001): 79.5 percent
- Lending interest rate (in percent): 9.1
- Exchange rates:
- Australian dollars per U.S. dollar (period average): 1.0 (end-period)
- Sources cited on the page: Tuvalu authorities; PFTAC; SPC; ADB; World Bank; and IMF staff estimates and projections.
Press Release No. 16/445, October 4, 2016, IMF Communications Department.