Press Release No. 17/28

IMF Staff Completes 2017 Article IV Mission to Nauru

January 29, 2017

An International Monetary Fund (IMF) team led by Tubagus Feridhanusetyawan visited Nauru during January 16–27 to hold discussions with the Nauruan authorities and other stakeholders on the 2017 Article IV Consultation. This is the first consultation since Nauru became the 189^th member of the IMF in April 2016 (see Press Release 16/167 ). At the conclusion of the mission, Mr. Feridhanusetyawan issued the following statement:

“Nauru’s growth and revenue have increased substantially in recent years owing to the Australian Regional Processing Center (RPC) to process asylum seekers, fishing license fees, and residual phosphate mining. In the near term, GDP growth is projected to moderate to 4 percent in FY2017 (ending June 30) mainly due to a slowdown in phosphate exports and limited expansion of the RPC. Inflation is projected to decline to around 6 percent along with moderating economic activities and stable food and fuel prices.

“Nauru continues to face daunting challenges in sustaining growth and ensuring fiscal sustainability due to its limited sources of growth and income. The medium-term outlook is vulnerable to the scaling down of the RPC as refugees are expected to be transferred to other countries, entailing a substantial decline in RPC revenue. With limited access to borrowing, fiscal spending would have to adjust accordingly. The outlook is also subject to downside risks including weaker-than-expected global growth and climate-change.

“Maintaining sufficient fiscal cash buffers while continue building the new Nauru trust fund with donors’ support would be critical to ensure fiscal liquidity and sustainability. The authorities should also implement tax and public finance management reforms to help control spending and support the needed fiscal adjustment, and strengthen public debt management to ensure fiscal and debt sustainability.

“Nauru faces a number of long-term challenges related to climate change and the costs of mitigating these challenges will weigh on fiscal balances. Therefore, developing a medium-term fiscal framework that can enhance economic resilience to climate change is important, while transparent budget management would help secure climate-change financing from donors.

“Promoting inclusive growth requires consistent implementation of structural reforms over the medium term supported by development partners. The key priorities include improving infrastructure, reforming the state owned enterprises, developing the financial sector, and addressing health-related challenges.

“The IMF will continue to provide technical assistance in public finance management, statistics, and other areas in supporting Nauru meet the challenges ahead.

“The team will prepare a staff report and present it to the Executive Board of the IMF for discussion scheduled in late March 2017.