{
  "title": "IMF Executive Board Concludes 2019 Article IV Consultation with Vanuatu",
  "publication": "IMF News, June 13, 2019",
  "sourceUrl": "https://www.imf.org/en/news/articles/2019/06/13/pr19216-vanuatu-imf-executive-board-concludes-2019-article-iv-consultation-with-vanuatu",
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  "summary": "Reconstruction after Cyclone Pam is near completion with \"full recovery in sight.\"",
  "publishDate": "2019-06-13",
  "sections": [
    {
      "heading": "Economic recovery and growth",
      "content": "- Reconstruction after Cyclone Pam is near completion with \"full recovery in sight.\"\n- Real GDP growth:\n  - 2017: 4.4 percent\n  - 2018: 3.2 percent\n  - 2019 (projection): 3.4 percent (slightly higher because of some delayed private investment)\n  - 2020 (projection): 2.9 percent (eases as fewer development-partner-financed projects)\n  - 2021 (projection): 2.8 percent\n- Growth drivers moving forward: tourism and agricultural diversification; fewer projects financed by development partners.\n- Vanuatu will graduate from LDC status in 2020, \"with little expected impact on their growth trajectory.\"\n- Vanuatu expected to implement the “PACER plus” free trade agreement with Australia, New Zealand and eight other Pacific island small states."
    },
    {
      "heading": "Fiscal and external position",
      "content": "- 2018 outcomes driven by windfall revenues from economic citizenship programs:\n  - Current account surplus (2018): 3.5 percent of GDP\n  - Fiscal surplus (2018): 4.8 percent of GDP\n- Projections:\n  - 2019: modest fiscal deficit of 3.2 percent of GDP and current account deficit of 1.2 percent of GDP\n  - Deficits expected to widen thereafter due to spending on new infrastructure projects financed more by concessional lending than grants and decreased revenues from economic citizenship programs.\n- Specific pressures noted: imports of airplanes for the Shared Vision 2030 plan for air travel and tourism.\n- Government finance indicators (selected, in percent of GDP):\n  - Total revenue (2018): 35.5\n  - Total revenue (2019 projection): 27.9\n  - Taxes (2018): 17.7\n  - Other revenue (2018): 11.9\n  - Grants (2018): 4.1 (note table shows grants varying; e.g., 2015: 11.8, 2016: 8.3, 2017: 8.4)\n  - Expenditure (2018): 30.7\n  - Expense (2018): 24.6\n  - Acquisition of nonfinancial assets (2018): 6.1\n  - Net lending (+)/borrowing (-) (2018): 4.8\n  - Net lending (+)/borrowing (-) (2019 projection): -3.2\n  - Public and publicly-guaranteed debt (end of period):\n    - 2018: 52.4 percent of GDP\n    - 2019 projection: 52.9 percent of GDP\n    - 2020 projection: 53.9 percent of GDP\n    - 2021 projection: 55.3 percent of GDP\n  - External debt (end of period, 2018): 45.2 percent of GDP"
    },
    {
      "heading": "Monetary policy and financial sector",
      "content": "- Monetary policy has maintained inflation within the 0 and 4 percent range using a pegged exchange rate regime and statutory reserve deposit requirements and open market operations.\n- Inflation:\n  - Consumer prices (period average): 2018: 2.0 percent; 2019 projection: 2.2 percent\n  - Consumer prices (end period): 2018: 2.6 percent\n- Monetary policy stance projected to remain neutral going forward.\n- Financial sector: \"generally sound\" with \"ample room to support financial inclusion,\" reflected in the National Financial Inclusion Strategy 2018–23.\n- Concerns: excess liquidity may be reducing monetary policy effectiveness and should be closely monitored.\n- Exchange rate: The vatu is officially pegged to an undisclosed basket of currencies.\n- Gross international reserves (in millions of U.S.$):\n  - 2014: 179.2\n  - 2015: 266.3\n  - 2016: 292.7\n  - 2017: 396.4\n  - 2018: 502.4\n  - 2019 projection: 552.0\n  - 2020 projection: 562.3\n  - 2021 projection: 579.0\n- Reserves in months of prospective G&S imports:\n  - 2014: 7.5\n  - 2015: 12.0\n  - 2016: 13.0"
    },
    {
      "heading": "Executive Board assessment — findings and policy recommendations",
      "content": "- Commendations and risks:\n  - Directors welcomed recovery from Cyclone Pam and focus on broader development objectives.\n  - High exposure to natural disasters remains a key risk to the outlook.\n- Fiscal policy recommendations:\n  - Continue fiscal discipline.\n  - Build adequate fiscal buffers and strengthen governance.\n  - Prioritize infrastructure investment and engage in further fiscal reform, including introducing corporate and personal income taxes while removing inefficient taxes.\n  - Reduce reliance on revenues from economic citizenship programs.\n  - Target to lower public-and publicly-guaranteed-debt-to-GDP to 50 percent.\n- Monetary and financial sector recommendations:\n  - Monetary policy stance considered appropriate as inflation expected near the middle of the 0‑4 percent band.\n  - Monitor excess liquidity closely as it may reduce policy effectiveness.\n  - Strengthen financial sector regulatory and legal frameworks to account for increasing fintech use.\n  - Continue enforcing AML/CFT framework to help maintain correspondent banking relationships.\n  - Implement National Financial Inclusion Strategy 2018–2023 to improve access to finance.\n- Disaster risk management and governance:\n  - National disaster planning framework improved substantially.\n  - Support proposed Disaster Risk Management Act with its national emergency fund to establish a multi‑year fund with consistent government funding.\n  - With limited administrative capacity and vulnerability to corruption, Directors suggested:\n    - Further strengthening the Reserve Bank of Vanuatu’s autonomy (in line with IMF 2016 Safeguards Assessment recommendations).\n    - Strengthening fiscal governance by completing the Government Business Enterprises Act and the Tax Administration Act.\n- Engagement with development partners:\n  - Authorities should continue constructive engagement for technical assistance, capacity development, and financing."
    },
    {
      "heading": "Key statistics and country facts (from Table 1 and text)",
      "content": "- Population (2017): 278,726\n- IMF quota: SDR 23.8 million (0.01 percent of total)\n- Main products and exports: Coconut oil, copra, kava, beef\n- Key export markets: New Zealand, Australia, Japan\n- Per capital DGP (2017): US$3,356\n- Literacy rate (2012): 83.4 percent\n- Selected macro indicators:\n  - Real GDP (annual percent change): 2014: 2.3; 2015: 0.2; 2016: 3.5; 2017: 4.4; 2018: 3.2\n  - Current account (in percent of GDP): 2014: -1.6; 2015: 0.5; 2016: -6.5; 2017: -1.2; 2018: -5.4; 2019 projection: -4.8\n  - Trade balance (in percent of GDP): 2018: -30.3\n  - Tourism receipts (in percent of GDP): 2018: 25.5; 2019 projection: 24.2\n  - Net foreign assets (annual percent change, 2018): 36.5\n  - Domestic credit (annual percent change, 2018): 5.4\n  - Nominal GDP (in millions of U.S. dollars): 2018: 928; 2019 projection: 947; 2020 projection: 998; 2021 projection: 1,051\n\nSource: IMF Executive Board Concludes 2019 Article IV Consultation with Vanuatu (Press Release No. 19/216, June 13, 2019).\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Vanuatu and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2019/06/13/pr19216-vanuatu-imf-executive-board-concludes-2019-article-iv-consultation-with-vanuatu"
    }
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    "Published: June 13, 2019",
    "Reconstruction after Cyclone Pam is near completion with \"full recovery in sight.\"",
    "Real GDP growth:",
    "Growth drivers moving forward: tourism and agricultural diversification; fewer projects financed by development partners.",
    "Vanuatu will graduate from LDC status in 2020, \"with little expected impact on their growth trajectory.\"",
    "Vanuatu expected to implement the “PACER plus” free trade agreement with Australia, New Zealand and eight other Pacific island small states.",
    "2018 outcomes driven by windfall revenues from economic citizenship programs:",
    "Projections:",
    "Specific pressures noted: imports of airplanes for the Shared Vision 2030 plan for air travel and tourism.",
    "Government finance indicators (selected, in percent of GDP):",
    "Monetary policy has maintained inflation within the 0 and 4 percent range using a pegged exchange rate regime and statutory reserve deposit requirements and open market operations.",
    "Inflation:",
    "Monetary policy stance projected to remain neutral going forward.",
    "Financial sector: \"generally sound\" with \"ample room to support financial inclusion,\" reflected in the National Financial Inclusion Strategy 2018–23.",
    "Concerns: excess liquidity may be reducing monetary policy effectiveness and should be closely monitored.",
    "Exchange rate: The vatu is officially pegged to an undisclosed basket of currencies.",
    "Gross international reserves (in millions of U.S.$):",
    "Reserves in months of prospective G&S imports:",
    "Commendations and risks:",
    "Fiscal policy recommendations:",
    "Monetary and financial sector recommendations:",
    "Disaster risk management and governance:",
    "Engagement with development partners:",
    "Population (2017): 278,726",
    "IMF quota: SDR 23.8 million (0.01 percent of total)",
    "Main products and exports: Coconut oil, copra, kava, beef",
    "Key export markets: New Zealand, Australia, Japan",
    "Per capital DGP (2017): US$3,356",
    "Literacy rate (2012): 83.4 percent",
    "Selected macro indicators:",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Vanuatu and the IMF](http://www.imf.org/external/country/VUT/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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