{
  "title": "IMF Executive Board Concludes 2023 Article IV Consultation with the Republic of the Marshall Islands",
  "publication": "IMF News, September 21, 2023",
  "sourceUrl": "https://www.imf.org/en/news/articles/2023/09/21/pr23319-marshall-islands-imf-executive-board-concludes-article-iv-consultation-marshall-islands",
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  "summary": "The Republic of the Marshall Islands (RMI) is in the midst of a post-pandemic recovery. Real GDP declined by 4.5 percent in the fiscal year ending September 2022 due to lower fisheries production arising from the sale of a fishing vessel by a domestic operator.",
  "publishDate": "2023-09-21",
  "sections": [
    {
      "heading": "Overview",
      "content": "- The Republic of the Marshall Islands (RMI) is in the midst of a post-pandemic recovery.\n- Real GDP declined by 4.5 percent in the fiscal year ending September 2022 due to lower fisheries production arising from the sale of a fishing vessel by a domestic operator; excluding the sector, growth was 4.2 percent.\n- Inflation picked up to 7.9 percent in March 2023 driven by higher food and fuel prices.\n- The current account surplus narrowed due to a decline in export volumes and grants and an increase in import payments because of higher prices."
    },
    {
      "heading": "Outlook and Risks",
      "content": "- Growth projections:\n  - Growth is expected to strengthen to 3 percent over FY2023-24 as fisheries performance improves and construction activity is supported by the resumption of donor-financed projects and preparations for the 2024 Micronesian Games.\n  - Medium-term growth is contingent on the successful renewal of the Compact of Free Association agreement with the United States; a new agreement would strengthen fiscal and external positions, while absence of a renewal would lead fiscal and current account balances to slip into deficit over the medium term.\n- Inflation and current account:\n  - Inflation is expected to moderate as commodity prices ease and supply disruptions recede.\n  - The current account surplus is expected to narrow further as COVID-related grants expire, though improved export performance is expected to narrow the trade deficit.\n- Risks:\n  - Risks are tilted to the downside, reflecting geographic isolation, vulnerability to climate change, volatility in fishing revenues and copra output, and fragile financial and trade links."
    },
    {
      "heading": "Executive Board Assessment",
      "content": "- Directors commended authorities’ actions to spur the post-pandemic recovery and welcomed that growth is expected to rebound in FY2023.\n- Directors emphasized significant uncertainty and risks related to geographic isolation, climate vulnerability, volatility in fishing revenues and copra output, and fragile financial and trade links.\n- Key points from Directors:\n  - Emphasized the importance of steadfast reform implementation to secure fiscal sustainability, address structural vulnerabilities, and support private sector growth, while leveraging Fund technical assistance.\n  - Urged strong near-term fiscal consolidation through firm revenue mobilization and expenditure reprioritization.\n  - Welcomed progress toward a new Compact agreement with the United States but stressed additional fiscal reforms are needed to build buffers, meet investment demands, and safeguard long-term fiscal and debt sustainability.\n  - Encouraged complementing modernization of public financial management and the customs revenue system with reforms to enhance tax administration and policies.\n  - Recommended gradually reducing subsidies to state-owned enterprises and replacing them with targeted support to the most vulnerable.\n  - Encouraged strengthening financial integrity and supervision; urged a cautious approach to new FinTech initiatives (including Decentralized Autonomous Organizations and the introduction of a stablecoin) and recommended ensuring an appropriate supervisory framework.\n  - Encouraged repealing the Sovereign Currency Act and withdrawing the Digital Economic Zone for Rongelap Atoll Bill.\n  - Stressed strengthening the AML/CFT framework to avoid loss of correspondent banking relationships.\n  - Concurred that establishing a Monetary Authority—with an appropriately focused mandate—could strengthen financial stability and inclusion.\n  - Emphasized the critical importance of building climate resilience, strengthening disaster management, and prioritizing climate-related investments; completing the National Adaptation Plan would help guide the transition to climate resilience, identify critical investments, and attract needed external financing.\n  - Encouraged structural reforms to boost growth and investment by promoting economic diversification and addressing the lack of available land."
    },
    {
      "heading": "Policy Recommendations",
      "content": "- Fiscal policy and revenue:\n  - Implement firm revenue mobilization measures.\n  - Reprioritize expenditures to achieve near-term fiscal consolidation.\n  - Pursue additional fiscal reforms to build buffers and meet investment needs.\n  - Enhance tax administration and tax policies complementary to public financial management and customs modernization.\n- State-owned enterprises and social protection:\n  - Gradually reduce subsidies to state-owned enterprises.\n  - Replace broad subsidies with targeted support to the most vulnerable.\n- Financial sector and digital initiatives:\n  - Strengthen financial integrity and supervision.\n  - Apply a cautious approach to FinTech initiatives and ensure an appropriate supervisory framework for Decentralized Autonomous Organizations and stablecoin proposals.\n  - Strengthen AML/CFT framework to preserve correspondent banking relationships.\n  - Consider establishing a Monetary Authority with a focused mandate to strengthen financial stability and inclusion.\n- Climate resilience and disaster management:\n  - Prioritize climate-related investments and disaster management.\n  - Complete the National Adaptation Plan to guide investments and attract external financing.\n- Structural reforms:\n  - Promote economic diversification.\n  - Address constraints related to lack of available land to boost growth and investment."
    },
    {
      "heading": "Key Economic and Financial Indicators (selected figures from table)",
      "content": "- Output and inflation:\n  - Real GDP (percent change): FY2019 10.3; FY2020 -2.9; FY2021 1.0; FY2022 -4.5; FY2023 3.0; FY2024 2.0; FY2025 1.8; FY2026 1.5.\n  - Consumer prices (percent change, period average): FY2019 -0.1; FY2020 -0.7; FY2021 2.2; FY2022 3.2; FY2023 5.2; FY2024 2.8; FY2025 2.3.\n  - Consumer prices (percent change, end of period): FY2019 -1.7; FY2020 5.7; FY2021 2.5; FY2022 2.0.\n- Central government finances (percent of GDP):\n  - Revenue and grants: FY2019 64.0; FY2020 70.7; FY2021 70.4; FY2022 66.4; FY2023 62.8; FY2024 69.5; FY2025 67.8; FY2026 68.9; FY2027 71.6; FY2028 70.1.\n  - Total domestic revenue: FY2019 33.0; FY2020 31.7; FY2021 28.7; FY2022 31.3; FY2023 30.9; FY2024 41.7; FY2025 40.9; FY2026 41.0; FY2027 41.1.\n  - Grants: FY2019 31.0; FY2020 39.0; FY2021 35.0; FY2022 31.9; FY2023 27.8; FY2024 26.9; FY2025 27.9; FY2026 30.6; FY2027 29.0.\n  - Expenditure: FY2019 65.8; FY2020 68.2; FY2021 70.2; FY2022 65.7; FY2023 69.4; FY2024 68.8; FY2025 70.3; FY2026 73.1; FY2027 72.0; FY2028 72.0.\n  - Expense: FY2019 63.2; FY2020 62.2; FY2021 63.3; FY2022 59.4; FY2023 53.0; FY2024 53.5; FY2025 54.5; FY2026 56.1; FY2027 58.4; FY2028 57.6.\n  - Net acquisition of nonfinancial assets: FY2019 2.6; FY2020 5.9; FY2021 6.8; FY2022 6.3; FY2023 9.8; FY2024 15.9; FY2025 14.3; FY2026 14.2; FY2027 14.8; FY2028 14.4.\n  - Net lending/borrowing: FY2019 -1.8; FY2020 0.2; FY2021 0.7; FY2022 0.0; FY2023 0.1; FY2024 -1.0; FY2025 -1.4; FY2026 -1.6; FY2027 -2.0.\n- Compact Trust Fund (in millions of US dollars; end of period): FY2019 434.7; FY2020 514.4; FY2021 668.9; FY2022 567.6; FY2023 621.1; FY2024 620.9; FY2025 622.5; FY2026 623.7; FY2027 624.3; FY2028 624.4.\n- Balance of payments (percent of GDP):\n  - Current account balance: FY2019 -31.3; FY2020 15.0; FY2021 22.6; FY2022 8.2; FY2023 4.1; FY2024 -0.4; FY2025 -4.8; FY2026 -8.0; FY2027 -12.0; FY2028 -15.0.\n  - Goods and services balance: FY2019 -79.3; FY2020 -37.2; FY2021 -24.9; FY2022 -33.1; FY2023 -27.3; FY2024 -33.7; FY2025 -35.6; FY2026 -38.8; FY2027 -43.0; FY2028 -44.6.\n  - Primary income: FY2019 21.4; FY2020 18.9; FY2021 9.7; FY2022 11.1; FY2023 20.1; FY2024 18.2; FY2025 17.2; FY2026 16.1; FY2027 15.1.\n  - Of which: fishing license fee: FY2019 10.4; FY2020 8.6; FY2021 7.1; FY2022 6.7; FY2023 7.6; FY2024 7.5.\n  - Secondary income: FY2019 26.6; FY2020 33.3; FY2021 37.7; FY2022 30.2; FY2023 21.7; FY2024 13.1; FY2025 12.6; FY2026 13.7; FY2027 14.5.\n  - Of which: Compact current grants: FY2019 16.0; FY2020 12.7; FY2021 12.2; FY2022 3.5; FY2023 3.4; FY2024 3.3.\n  - Current account excluding current grants: FY2019 -16.4; FY2020 -24.2; FY2021 -18.4; FY2022 -4.3; FY2023 -9.0; FY2024 -12.2; FY2025 -11.3; FY2026 -15.3; FY2027 -18.3.\n- External PPG debt (in millions of US$; end of period): FY2019 67.5; FY2020 66.2; FY2021 63.5; FY2022 59.6; FY2023 59.7; FY2024 59.2; FY2025 62.3; FY2026 66.7; FY2027 78.6.\n- External PPG debt (Percent of GDP; end of period): FY2019 29.1; FY2020 27.5; FY2021 24.6; FY2022 22.8; FY2023 21.6; FY2024 20.2; FY2025 20.5; FY2026 21.1; FY2027 21.9; FY2028 23.2.\n- Memorandum item — Nominal GDP (in millions of US dollars): FY2019 231.9; FY2020 240.6; FY2021 257.5; FY2022 261.2; FY2023 276.8; FY2024 292.8; FY2025 304.5; FY2026 315.9; FY2027 327.0; FY2028 338.4.\n\nSource: IMF Press Release No. 23/319, September 21, 2023.\n\n---\n\n\n References\n\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/2023/09/21/pr23319-marshall-islands-imf-executive-board-concludes-article-iv-consultation-marshall-islands"
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    "Published: September 21, 2023",
    "The Republic of the Marshall Islands (RMI) is in the midst of a post-pandemic recovery.",
    "Real GDP declined by 4.5 percent in the fiscal year ending September 2022 due to lower fisheries production arising from the sale of a fishing vessel by a domestic operator; excluding the sector, growth was 4.2 percent.",
    "Inflation picked up to 7.9 percent in March 2023 driven by higher food and fuel prices.",
    "The current account surplus narrowed due to a decline in export volumes and grants and an increase in import payments because of higher prices.",
    "Growth projections:",
    "Inflation and current account:",
    "Risks:",
    "Directors commended authorities’ actions to spur the post-pandemic recovery and welcomed that growth is expected to rebound in FY2023.",
    "Directors emphasized significant uncertainty and risks related to geographic isolation, climate vulnerability, volatility in fishing revenues and copra output, and fragile financial and trade links.",
    "Key points from Directors:",
    "Fiscal policy and revenue:",
    "State-owned enterprises and social protection:",
    "Financial sector and digital initiatives:",
    "Climate resilience and disaster management:",
    "Structural reforms:",
    "Output and inflation:",
    "Central government finances (percent of GDP):",
    "Compact Trust Fund (in millions of US dollars; end of period): FY2019 434.7; FY2020 514.4; FY2021 668.9; FY2022 567.6; FY2023 621.1; FY2024 620.9; FY2025 622.5; FY2026 623.7; FY2027 624.3; FY2028 624.4.",
    "Balance of payments (percent of GDP):",
    "External PPG debt (in millions of US$; end of period): FY2019 67.5; FY2020 66.2; FY2021 63.5; FY2022 59.6; FY2023 59.7; FY2024 59.2; FY2025 62.3; FY2026 66.7; FY2027 78.6.",
    "External PPG debt (Percent of GDP; end of period): FY2019 29.1; FY2020 27.5; FY2021 24.6; FY2022 22.8; FY2023 21.6; FY2024 20.2; FY2025 20.5; FY2026 21.1; FY2027 21.9; FY2028 23.2.",
    "Memorandum item — Nominal GDP (in millions of US dollars): FY2019 231.9; FY2020 240.6; FY2021 257.5; FY2022 261.2; FY2023 276.8; FY2024 292.8; FY2025 304.5; FY2026 315.9; FY2027 327.0; FY2028 338.4.",
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