## IMF Executive Board Concludes 2021 Article IV Consultation with Nauru _IMF News, February 7, 2022_ ## Source details **Canonical URL:** [IMF Executive Board Concludes 2021 Article IV Consultation with Nauru](https://www.imf.org/en/news/articles/2022/02/07/pr2229-nauru-imf-executive-board-concludes-2021-article-iv-consultation) ## Other formats - [Markdown version](/en/news/articles/2022/02/07/pr2229-nauru-imf-executive-board-concludes-2021-article-iv-consultation/index.md) - [Structured JSON version](/en/news/articles/2022/02/07/pr2229-nauru-imf-executive-board-concludes-2021-article-iv-consultation/index.json) - [Bundle manifest](/en/news/articles/2022/02/07/pr2229-nauru-imf-executive-board-concludes-2021-article-iv-consultation/bundle-manifest.json) ## Bibliographic details - Published: February 7, 2022 --- ### Overview - Date: February 7, 2022. - On February 2, 2022, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Nauru. - Pandemic-related policy response included freight support to ensure food and fuel security, quarantine measures, securing vaccines, and scaling-up of intensive care facilities. - As of December 2021, Nauru had not had any COVID-19 cases on the island; the adult population was nearly fully vaccinated, and vaccination for under-18-year-olds was expected to commence shortly. ### Economic performance and outlook - Recent growth: - Real GDP growth: 0.7 percent in FY20 and 1.5 percent in FY21. - The economy expanded despite delays in construction projects due to supply chain disruptions. - FY22 projection: - Real GDP growth expected to slow to 0.9 percent in FY22 (from 1.5 percent in FY21). - Current account expected to narrow to a surplus of 1.2 percent of GDP in FY22. - Drivers of moderation: expected slowdown in Regional Processing Center (RPC) activity, departure of RPC-associated expatriate workers, and a lower goods balance from the increase in fuel prices. - Fiscal support: - Near-term fiscal support should be calibrated to the state of the pandemic. - Continued fiscal support recommended for food and fuel security. - Importance of reducing subsidies for state-owned enterprise operations as they return to pre-pandemic levels. - Recommendation to shift budget allocations away from non-transparent expenditures toward health, education, and further investments in climate resilience. - Revenue and tax policy: - Non-tax revenues rely on external sources. - Encouraged formulation of a medium-term tax reform strategy that widens the tax base and generates more reliable forms of revenue to help achieve fiscal self-reliance. - Structural policy: - Need to identify new sources of growth to support long-term development, generate revenues, and create local employment. - Recommended structural reforms to improve the business environment, address governance weaknesses, and attract private investment. - To strengthen resilience to climate change, integrate adaptation plans into a medium-term fiscal framework and pursue donor support for green financing. - Encourage sustained efforts to secure new donor commitments to address key infrastructure gaps. - Governance and capacity: - Supported ongoing efforts to strengthen the AML/CFT framework. - Encouraged consideration of regional solutions to correspondent banking relationship challenges. - Recommended leveraging the Fund’s and other development partners’ capacity development assistance, including to continue improving the quality and availability of macroeconomic statistics. - Called for further strengthening public finance management and the debt management strategy. ### Risks to the outlook - Tilt: Risks to the outlook are tilted significantly to the downside. - Health risks: - Given limited medical facilities and a high incidence of risk factors such as diabetes, a local COVID-19 outbreak could have adverse health and growth implications. - RPC uncertainty: - Medium-term fiscal outlook remains exceptionally uncertain pending clarity about RPC-related revenues when the facility moves to a model of “enduring capability.” - RPC employment is about 15 percent of the local labor force; a significant number of Nauruans could be at risk of long-term job loss under enduring capability if a labor reallocation strategy is inadequately implemented. - External and disaster risks: - External downside risks include a sharper-than-projected rise in commodity prices, natural disasters, and a more protracted global recovery that delays infrastructure projects on the island. - Upside risks: - An extension of RPC with no job losses. - Successful commercialization of the port project. ### Executive Board Assessment and recommendations - Commendations: - Directors commended Nauruan authorities for effective measures to prevent a domestic outbreak of COVID-19 and for supportive policies that helped the economy continue expanding in FY2020 and FY2021. - Directors commended steps taken to restore debt sustainability. - Policy recommendations (summary): - Calibrate near-term fiscal support to the state of the pandemic. - Formulate plans to absorb or upskill workers employed in the Regional Processing Center. - Continue fiscal support for food and fuel security; reduce SOE subsidies as operations normalize. - Shift budget allocations to health, education, and climate resilience. - Formulate a medium-term tax reform strategy to widen the tax base and increase reliable revenues. - Strengthen public finance management and debt management strategy. - Identify new sources of growth; undertake structural reforms to improve business environment and governance to attract private investment. - Integrate climate adaptation into medium-term fiscal planning and pursue donor support for green financing. - Strengthen AML/CFT framework and explore regional solutions to correspondent banking challenges. - Use IMF and development partners’ capacity development to improve macroeconomic statistics. ### Key statistics (selected) - Nominal GDP (US$ million): 114.4 - Per capita GDP (US$): 8,867 - Population: 12,906 - Real GDP growth (percent change), FY2017–FY2022: - FY2017: -5.5 - FY2018: 5.7 - FY2019: 1.0 - FY2020: 0.7 - FY2021 (Est.): 1.5 - FY2022 (Proj.): 0.9 - Consumer price index (period average, percent change), FY2017–FY2022: - FY2017: 5.1 - FY2018: 0.5 - FY2019: 4.3 - FY2020: 1.2 - FY2021 (Est.): 1.4 - Population (thousand), FY2017–FY2021: - FY2017: 13.4 - FY2018: 13.2 - FY2019: 12.7 - FY2020: 12.9 - Structure of the economy (percent of total): - Agriculture: FY2018 4.4; FY2019 3.8; FY2020 4.7; FY2021 4.8 - Manufacturing: FY2018 17.2; FY2019 10.1; FY2020 7.9; FY2021 7.5; FY2022 7.4 - Services: FY2018 71.8; FY2019 77.0; FY2020 73.7; FY2021 73.3; FY2022 74.4 - Government finance (In percent of GDP), FY2017–FY2022: - Total revenue and grants: FY2017 121.8; FY2018 129.3; FY2019 148.7; FY2020 170.2; FY2021 179.2; FY2022 169.2 - Revenue: FY2017 100.6; FY2018 108.5; FY2019 136.0; FY2020 151.4; FY2021 137.0; FY2022 151.5 - Grants 2/: FY2017 21.3; FY2018 20.8; FY2019 18.8; FY2020 42.2; FY2021 17.7 - Total expenditure: FY2017 101.7; FY2018 95.6; FY2019 118.9; FY2020 134.5; FY2021 135.5; FY2022 139.9 - Net lending (+) / borrowing (-): FY2017 20.1; FY2018 33.6; FY2019 29.9; FY2020 35.7; FY2021 43.8; FY2022 29.3 - Including Trust Fund contribution: FY2017 11.9; FY2018 24.4; FY2019 21.1; FY2020 21.7; FY2021 24.9 - Stock of government deposits 3/: FY2017 7.0; FY2018 24.2; FY2019 35.5; FY2020 52.0; FY2021 44.1; FY2022 57.6 - Stock of Trust Fund: FY2017 39.1; FY2018 52.8; FY2019 66.9; FY2020 81.3; FY2021 122.0; FY2022 132.5 - Balance of payments (In percent of GDP), selected: - Current account balance: FY2017 17.9; FY2018 12.8; FY2019 8.0; FY2020 6.5; FY2021 12.3; FY2022 4.9 - Capital account balance: FY2017 2.8; FY2018 4.1; FY2019 3.5 - Financial accounts balance and other flows: FY2017 12.4; FY2018 44.2; FY2019 40.5; FY2020 45.1; FY2021 85.1; FY2022 52.6 - Government debt indicators (In percent of GDP), selected: - External debt 4/: FY2017 50.1; FY2018 50.3; FY2019 48.8; FY2020 51.4; FY2021 9.3; FY2022 25.8 - Domestic debt 5/: FY2017 34.4; FY2018 31.4; FY2019 29.5; FY2020 30.1; FY2021 5.2; FY2022 14.0 - External debt service 6/ (In percent of exports of goods and services): FY2017 2.5; FY2018 9.2; FY2019 1.3; FY2020 1.1 - Exchange rates: - Australian dollar per U.S. dollar (period average): FY2017 1.33; FY2018 1.29; FY2019 1.40; FY2020 1.49; FY2021 1.34 - Nominal GDP (in millions of Australian dollars): FY2017 145.3; FY2018 160.0; FY2019 165.7; FY2020 170.5; FY2021 178.5; FY2022 184.5 - Nominal GNI (in millions of Australian dollars): FY2017 202.9; FY2018 217.7; FY2019 238.1; FY2020 264.0; FY2021 296.9; FY2022 320.8 - Nominal GDP per capita (in US dollars), FY2017–FY2021: - FY2017 8,152; FY2018 9,399; FY2019 9,365; FY2020 10,138 *Source: IMF staff estimates and projections, and Nauru authorities.* --- ## References - [Republic of Naoero and the IMF](https://www.imf.org/en/news/searchnews) - [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance) - [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/2022/02/07/pr2229-nauru-imf-executive-board-concludes-2021-article-iv-consultation_