IMF Staff Concludes 2018 Article IV Consultation to Tuvalu

IMF News, April 24, 2018

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IMF team led by Jongsoon Shin visited Tuvalu from April 12–April 19, 2018 to conduct the 2018 Article IV Consultation.
The team exchanged views with senior officials of the Tuvalu government, public enterprises and private sector representatives, and development partners.
End-of-Mission press release conveys preliminary findings of IMF staff; views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

Real GDP growth in 2017 is estimated at 3.2 percent.
Real GDP growth is projected to rise to 4.3 percent in 2018 due to increased capital expenditure.
Inflation accelerated to 4.4 percent in 2017.
Inflation is expected to slow to 3.8 percent in 2018 on moderating food prices.
International reserves are broadly sufficient at about 9 months of imports.
The value of the Tuvalu Trust Fund (TTF) reached AU$175 million (333 percent of GDP) at end-2017.

Fiscal accounts turned into a deficit of around 4 percent of GDP in 2017 on higher capital expenditure and a shortfall of grants.
Capital expenditure has accelerated in preparation for the Polynesian Leaders’ Summit in 2018 and the Pacific Forum Secretariat Summit in 2019.
For 2018, the fiscal accounts are expected to record a surplus of 6 percent of GDP due to strong fishing license fees.

Authorities have made progress in strengthening climate change resilience and improving public financial management (PFM).
The assessment phase of coastal adaptation projects under the Green Climate Fund is on track to be completed this year.
Implementation of the PFM Roadmap 2017-21 has helped improve treasury reporting, tax audit, and cash management.

The economy is susceptible to the effects of climate change and natural disasters.
Fiscal revenue base faces uncertainties from volatile fishing revenues and reliance on external grants.
Weak balance sheets of public enterprises and limited financial supervision create risks to fiscal accounts and impede banks’ credit intermediation.

Promote resilience to external shocks, including climate change, natural disasters, and volatile fishing revenue and grants.
Strengthen the fiscal framework to maintain buffers.
Further improve climate change risk management.
Implement macro-structural policies to increase potential output and diversify the growth base, including:
- the development of human capital,
- promotion of tourism,
- improvement in financial intermediation and supervision.

The IMF continues to support Tuvalu’s reform agenda through various forms of technical assistance in pertinent macroeconomic areas.

Source: IMF Communications Department, Press Release No. 18/146, April 24, 2018.