IMF Staff Country Reports

This Selected Issues paper focuses on a model based approach to study public investment, economic growth, and resilience in the Federated States of Micronesia (FSM). Enhancing public investment management (selection, planning, and implementation) could significantly improve the efficiency of public investment and support economic growth. This is particularly important as FSM starts a new boost to public investment financed by foreign grants. Using a dynamic Debt, Investment, Growth, and Natural Disasters model, we illustrate the effects of various policy options on achieving higher and more resilient growth and improving private sector participation. The reforms can also have fiscal benefits through the higher growth dividend. Additionally, the impact of different types of public investment on building resilience to climate shocks emphasizes the benefits of larger investment in climate-resilient infrastructure to minimize gross domestic product loss and allow the economy to bounce back faster after a large natural disaster.