## IMF Executive Board Concludes 2023 Article IV Consultation with Nauru _IMF News, November 28, 2023_ ## Source details **Canonical URL:** [IMF Executive Board Concludes 2023 Article IV Consultation with Nauru](https://www.imf.org/en/news/articles/2023/11/28/pr23410-nauru-imf-executive-board-concludes-2023-article-iv-consultation) ## Other formats - [Markdown version](/en/news/articles/2023/11/28/pr23410-nauru-imf-executive-board-concludes-2023-article-iv-consultation/index.md) - [Structured JSON version](/en/news/articles/2023/11/28/pr23410-nauru-imf-executive-board-concludes-2023-article-iv-consultation/index.json) - [Bundle manifest](/en/news/articles/2023/11/28/pr23410-nauru-imf-executive-board-concludes-2023-article-iv-consultation/bundle-manifest.json) ## Bibliographic details - Published: November 28, 2023 --- ### Overview: recent developments and FY2023 outcomes - On November 17, the Executive Board of the International Monetary Fund (IMF) concluded the 2023 Article IV consultation with Republic of Nauru. - Real GDP growth is estimated at 0.6 percent in FY2023, reflecting weaker demand and service-related trade due to a scale down of the Regional Processing Center (RPC). - Inflation reached 6.3 percent in FY2023 amid external shocks and escalating transportation costs. - The fiscal surplus declined due to a reduction in RPC-related activities but remained sizable. - Fiscal balance excluding the government’s contribution to the Nauru Trust Fund (NTF) was at 8.3 percent of GDP in FY2023. - Debt was assessed to be sustainable under current policies. - The external position is assessed to be moderately weaker than the level implied by fundamentals and desirable policies in FY2022. ### Medium-term outlook and drivers - Growth and inflation are expected to moderate over the medium term. - Planned scale down of the RPC is expected to adversely affect economic activity and fiscal and external positions over the medium term. - Diversification opportunities from the climate-resilient port and the construction of the fiber-optic cable are expected to provide some offset. - Inflation is expected to slow as a result of lower global inflation and a tightening of monetary policy in Australia. - The fiscal surplus is expected to decline this year and narrow significantly over the medium term. ### Risks to the outlook - Downside risks: - Deepening geo-economic fragmentation and an abrupt global slowdown could affect Nauru’s trading partners and donors. - Higher commodity prices could put upward pressure on inflation and fiscal spending. - Continued pressure on financial services could disrupt national and international payments, affecting essential economic activities. - Delayed fiscal and structural reforms could lead to overdependence on volatile revenue sources, jeopardizing fiscal sustainability. - Uncertainties related to activities of the RPC pose risks to the medium-term economic and fiscal outlook. - Vulnerability to extreme climate events, similar to other pacific island countries (PICs). - Upside risks: - Unexpected extension of RPC activities. - Increased demand for fishing licenses. ### Executive Board Assessment and recommendations - Directors noted that growth is expected to moderate over the medium term and risks are tilted to the downside. - Emphasis on the importance of structural and fiscal reforms, supported by capacity development, to promote diversification, sustainable growth, and climate resilience, particularly given the planned scale-down of the RPC. Fiscal policy - Fiscal policy should be anchored by fiscal discipline, revenue mobilization, and expenditure prioritization. - Maintaining sufficient fiscal surplus to meet the target value of the Nauru Trust Fund is key to supporting long-term growth and resilience. - Tax reforms anchored in strong policy commitment and public support are needed to generate more sustainable sources of revenue. - Expenditure policies should prioritize spending that promotes growth, resilience, and inclusion. Financial sector and payments - Authorities should further strengthen the AML/CFT framework, in line with recommendations from the FATF and the ongoing APG Mutual Evaluation. - Given the planned exit from the country of the only institution providing financial services and access to cross-border payments, close cooperation with foreign counterparts is important to facilitate the participation of new regional financial services providers in Nauru. - Both market and non-market solutions are needed to improve access to formal financial services. - Addressing infrastructure gaps that constrain the use of digital payments is important. Structural reforms and data - Structural reforms to improve human capital, climate resilience, diversification, and governance are essential for long-term growth. - Education spending should prioritize improving participation and outcomes. - A detailed costing of priority projects would be critical for allowing a more strategic pursuit of climate finance. - Completion of the new climate‑resilient port and the undersea cable are expected to bring new sources of growth and employment opportunities. - Data shortcomings remain prevalent; continued efforts to enhance statistics, with adequate support from development partners, are needed. ### Key statistics and selected indicators (FY2021-25 and related data) - Nominal GDP (AU$ million, FY2023): 154.0 - Human capital index (scale 0-1, 2020): 0.51 - Per capita GDP (AU$, FY2023): 12,040 - Infant mortality rate (per 1000 live births, 2021): 23.2 - Population (FY2023): 12787 - Poverty rate at $6.85 a day (2017 PPP, 2012): 61.7 Real sector (percent change) - Real GDP growth: FY2021 = 7.2; FY2022 = 2.8; FY2023 = 0.6; FY2024 (Proj.) = 1.4; FY2025 (Proj.) = 1.2 - Consumer price index (period average, percent change): FY2021 = 1.1; FY2022 = 3.6; FY2023 = 6.3; FY2024 (Proj.) = 5.3; FY2025 (Proj.) = 4.1 - Population (thousand): FY2021 = 12.3; FY2022 = 12.5; FY2023 = 12.8; FY2024 (Proj.) = 13.0; FY2025 (Proj.) = 13.3 Structure of the economy (percent of GDP) - Agriculture: FY2021 = 3.2; FY2022 = 3.3 - Manufacturing: FY2021 = 14.3; FY2022 = 15.6; FY2023 = 16.6; FY2024 (Proj.) = 15.0; FY2025 (Proj.) = 14.7 - Services: FY2021 = 74.6; FY2022 = 71.4; FY2023 = 72.1; FY2024 (Proj.) = 74.0; FY2025 (Proj.) = 74.0 Government finance (in percent of GDP) - Total revenue and grants: FY2021 = 137.4; FY2022 = 158.3; FY2023 = 135.3; FY2024 (Proj.) = 128.9; FY2025 (Proj.) = 95.6 - Revenue: FY2021 = 103.9; FY2022 = 138.5; FY2023 = 119.5; FY2024 (Proj.) = 100.0; FY2025 (Proj.) = 77.3 - Grants 2/: FY2021 = 33.6; FY2022 = 19.8; FY2023 = 15.9; FY2024 (Proj.) = 28.9; FY2025 (Proj.) = 18.3 - Total expenditure: FY2021 = 93.0; FY2022 = 133.5; FY2023 = 116.2; FY2024 (Proj.) = 115.2; FY2025 (Proj.) = 88.8 - Net lending (+) / borrowing (-): FY2021 = 44.5; FY2022 = 24.8; FY2023 = 19.1; FY2024 (Proj.) = 13.6; FY2025 (Proj.) = 6.8 - Excluding Trust Fund contribution: FY2021 = 30.2; FY2022 = 12.6; FY2023 = 8.3; FY2024 (Proj.) = 6.0 - Stock of government deposits 3/: FY2021 = 32.2; FY2022 = 46.2; FY2023 = 49.4; FY2024 (Proj.) = 47.6; FY2025 (Proj.) = 43.5 - Stock of Trust Fund: FY2021 = 81.3; FY2022 = 111.5; FY2023 = 122.4; FY2024 (Proj.) = 131.0; FY2025 (Proj.) = 144.2 Balance of payments - Current account balance (in percent of GDP): FY2021 = 8.9; FY2022 = -1.1; FY2023 = 7.9; FY2024 (Proj.) = -2.5 - Current account balance (other listing): FY2021 = 3.8; FY2022 = -0.5; FY2023 = 3.4; FY2024 (Proj.) = 5.2; FY2025 (Proj.) = -0.9 - Capital account balance: FY2021 = 85.1; FY2022 = 53.6; FY2023 = 38.1; FY2024 (Proj.) = 69.2; FY2025 (Proj.) = 44.8 - Financial accounts balance and other flows: FY2021 = 111.8; FY2022 = 60.7; FY2023 = 46.0; FY2024 (Proj.) = 82.2; FY2025 (Proj.) = 42.3 Government debt indicators - External debt 4/: FY2021 = 9.3; FY2022 = 25.8; FY2023 = 26.2; FY2024 (Proj.) = 38.7; FY2025 (Proj.) = 35.1 - Domestic debt 5/: FY2021 = 3.9; FY2022 = 12.2; FY2023 = 11.5; FY2024 (Proj.) = 13.5; FY2025 (Proj.) = 10.0 - Domestic debt (alternate listing): FY2021 = 39.0; FY2022 = 21.1; FY2023 = 19.9; FY2024 (Proj.) = 18.9; FY2025 (Proj.) = 17.9 - External debt service 6/: FY2021 = 0.8; FY2022 = 5.7; FY2023 = 6.4 (In percent of exports of goods and services: FY2021 = 0.7; FY2022 = 5.6; FY2023 = 6.6) Exchange rates and aggregates - Australian dollar per U.S. dollar (period average): FY2021 = 1.34; FY2022 = 1.38; FY2023 = 1.48 - Nominal GDP (in millions of Australian dollars): FY2021 = 235.5; FY2022 = 212.0; FY2023 = 228.6; FY2024 (Proj.) = 248.6; FY2025 (Proj.) = 259.8 - Nominal GNI (in millions of Australian dollars): FY2021 = 353.8; FY2022 = 346.5; FY2023 = 389.4; FY2024 (Proj.) = 449.7; FY2025 (Proj.) = 410.4 - Nominal GDP per capita (in US dollars): FY2021 = 14,303; FY2022 = 12,269 Notes and footnotes (as presented) - Nauru uses the Australian dollar as the legal tender, and the fiscal year ends in June. The revised growth statistics is scheduled to be published in January 2024. - In FY2021 grants include debt forgiveness for Yen Bonds. - Stock of government deposits is under review by authorities and may be updated. - External debt includes the defaulted Yen bonds (until 2021 when the debt was settled), and use of Special Drawing Rights (SDR). - Domestic debt includes the estimated government liability related to Bank of Nauru's liquidation. - External debt service over the projection period is through bilateral grants. *IMF Communications Department, Press Release No. 23/410 (November 28, 2023).* --- ## 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) - [Australia and the IMF](http://www.imf.org/external/country/AUS/index.htm) - [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/2023/11/28/pr23410-nauru-imf-executive-board-concludes-2023-article-iv-consultation_