## IMF Executive Board Concludes 2019 Article IV Consultation with Vanuatu _IMF News, June 13, 2019_ ## Source details **Canonical URL:** [IMF Executive Board Concludes 2019 Article IV Consultation with Vanuatu](https://www.imf.org/en/news/articles/2019/06/13/pr19216-vanuatu-imf-executive-board-concludes-2019-article-iv-consultation-with-vanuatu) ## Other formats - [Markdown version](/en/news/articles/2019/06/13/pr19216-vanuatu-imf-executive-board-concludes-2019-article-iv-consultation-with-vanuatu/index.md) - [Structured JSON version](/en/news/articles/2019/06/13/pr19216-vanuatu-imf-executive-board-concludes-2019-article-iv-consultation-with-vanuatu/index.json) - [Bundle manifest](/en/news/articles/2019/06/13/pr19216-vanuatu-imf-executive-board-concludes-2019-article-iv-consultation-with-vanuatu/bundle-manifest.json) ## Bibliographic details - Published: June 13, 2019 --- ### Economic recovery and growth - Reconstruction after Cyclone Pam is near completion with "full recovery in sight." - Real GDP growth: - 2017: 4.4 percent - 2018: 3.2 percent - 2019 (projection): 3.4 percent (slightly higher because of some delayed private investment) - 2020 (projection): 2.9 percent (eases as fewer development-partner-financed projects) - 2021 (projection): 2.8 percent - 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. ### Fiscal and external position - 2018 outcomes driven by windfall revenues from economic citizenship programs: - Current account surplus (2018): 3.5 percent of GDP - Fiscal surplus (2018): 4.8 percent of GDP - Projections: - 2019: modest fiscal deficit of 3.2 percent of GDP and current account deficit of 1.2 percent of GDP - 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. - 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): - Total revenue (2018): 35.5 - Total revenue (2019 projection): 27.9 - Taxes (2018): 17.7 - Other revenue (2018): 11.9 - Grants (2018): 4.1 (note table shows grants varying; e.g., 2015: 11.8, 2016: 8.3, 2017: 8.4) - Expenditure (2018): 30.7 - Expense (2018): 24.6 - Acquisition of nonfinancial assets (2018): 6.1 - Net lending (+)/borrowing (-) (2018): 4.8 - Net lending (+)/borrowing (-) (2019 projection): -3.2 - Public and publicly-guaranteed debt (end of period): - 2018: 52.4 percent of GDP - 2019 projection: 52.9 percent of GDP - 2020 projection: 53.9 percent of GDP - 2021 projection: 55.3 percent of GDP - External debt (end of period, 2018): 45.2 percent of GDP ### Monetary policy and financial sector - 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: - Consumer prices (period average): 2018: 2.0 percent; 2019 projection: 2.2 percent - Consumer prices (end period): 2018: 2.6 percent - 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.$): - 2014: 179.2 - 2015: 266.3 - 2016: 292.7 - 2017: 396.4 - 2018: 502.4 - 2019 projection: 552.0 - 2020 projection: 562.3 - 2021 projection: 579.0 - Reserves in months of prospective G&S imports: - 2014: 7.5 - 2015: 12.0 - 2016: 13.0 ### Executive Board assessment — findings and policy recommendations - Commendations and risks: - Directors welcomed recovery from Cyclone Pam and focus on broader development objectives. - High exposure to natural disasters remains a key risk to the outlook. - Fiscal policy recommendations: - Continue fiscal discipline. - Build adequate fiscal buffers and strengthen governance. - Prioritize infrastructure investment and engage in further fiscal reform, including introducing corporate and personal income taxes while removing inefficient taxes. - Reduce reliance on revenues from economic citizenship programs. - Target to lower public-and publicly-guaranteed-debt-to-GDP to 50 percent. - Monetary and financial sector recommendations: - Monetary policy stance considered appropriate as inflation expected near the middle of the 0‑4 percent band. - Monitor excess liquidity closely as it may reduce policy effectiveness. - Strengthen financial sector regulatory and legal frameworks to account for increasing fintech use. - Continue enforcing AML/CFT framework to help maintain correspondent banking relationships. - Implement National Financial Inclusion Strategy 2018–2023 to improve access to finance. - Disaster risk management and governance: - National disaster planning framework improved substantially. - Support proposed Disaster Risk Management Act with its national emergency fund to establish a multi‑year fund with consistent government funding. - With limited administrative capacity and vulnerability to corruption, Directors suggested: - Further strengthening the Reserve Bank of Vanuatu’s autonomy (in line with IMF 2016 Safeguards Assessment recommendations). - Strengthening fiscal governance by completing the Government Business Enterprises Act and the Tax Administration Act. - Engagement with development partners: - Authorities should continue constructive engagement for technical assistance, capacity development, and financing. ### Key statistics and country facts (from Table 1 and text) - 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: - Real GDP (annual percent change): 2014: 2.3; 2015: 0.2; 2016: 3.5; 2017: 4.4; 2018: 3.2 - 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 - Trade balance (in percent of GDP): 2018: -30.3 - Tourism receipts (in percent of GDP): 2018: 25.5; 2019 projection: 24.2 - Net foreign assets (annual percent change, 2018): 36.5 - Domestic credit (annual percent change, 2018): 5.4 - Nominal GDP (in millions of U.S. dollars): 2018: 928; 2019 projection: 947; 2020 projection: 998; 2021 projection: 1,051 *Source: IMF Executive Board Concludes 2019 Article IV Consultation with Vanuatu (Press Release No. 19/216, June 13, 2019).* --- ## References - [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) _Source: https://www.imf.org/en/news/articles/2019/06/13/pr19216-vanuatu-imf-executive-board-concludes-2019-article-iv-consultation-with-vanuatu_