{
  "title": "IMF Staff Completes 2025 Article IV Mission to Palau",
  "publication": "IMF News, November 19, 2025",
  "sourceUrl": "https://www.imf.org/en/news/articles/2025/11/19/pr-25379-palau-imf-staff-completes-2025-article-iv-mission",
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  "summary": "An International Monetary Fund (IMF) team led by Ms. Yuanyan Sophia Zhang conducted discussions on the Palauan economy for the 2025 Article IV Consultation from November 6 to 19, 2025. At the end of the mission, Ms. Zhang issued the following statement:",
  "publishDate": "2025-11-19",
  "sections": [
    {
      "heading": "Mission scope and timing",
      "content": "- IMF team led by Ms. Yuanyan Sophia Zhang conducted discussions for the 2025 Article IV Consultation from November 6 to 19, 2025.\n- End-of-mission statement issued as Press Release No. 25/379."
    },
    {
      "heading": "Recent macroeconomic performance and outlook",
      "content": "- Growth:\n  - FY2024: 12 percent growth.\n  - FY2025: growth expected to have remained robust at 6.7 percent, supported by favorable trends in tourism and construction.\n  - FY2026: recovery expected to continue with growth remaining robust, supported by a gradual rebound in tourism, construction and infrastructure investment.\n- Inflation:\n  - FY2025: inflation at 0.2 percent.\n  - Medium term: inflation expected to rise from 0.2 percent in FY2025 and stabilize around 2 percent.\n- Fiscal and debt:\n  - Public debt declined from a peak of 81 percent to 67 percent of GDP by the end of FY2024.\n  - Fiscal balances improved: fiscal deficits have turned into surpluses due to economic recovery, increased grants, successful tax reform, and spending restraint.\n- Real GDP:\n  - Real GDP remained below pre-pandemic levels in FY2024 despite rebound.\n- Labor and wages:\n  - Minimum wage increases have helped real wages recover to their pre-pandemic trend."
    },
    {
      "heading": "Risks and upside factors",
      "content": "- Downside risks:\n  - Geopolitical tensions and global policy uncertainty could slow tourism activity, disrupt foreign investment, and affect donor support.\n  - Exposure to global shocks and extreme weather events.\n- Upside potential:\n  - Swift parliamentary approval of the full FY2026 budget could boost confidence and improve the outlook."
    },
    {
      "heading": "Policy findings and recommendations",
      "content": "- Fiscal policy and public debt management:\n  - Maintain fiscal prudence and preserve buffers through effective implementation of a medium-term fiscal strategy.\n  - FY2026-29 fiscal strategy should provide a clear roadmap to align fiscal priorities with development objectives, including reducing the debt-to-GDP ratio to pre-pandemic levels.\n  - Extended grant from the renewed COFA agreement presents an important opportunity to prioritize reducing debt obligations and enhance resilience.\n- Revenue and tax administration:\n  - Commendation for successful implementation of tax reform, including rollout of the Palau Goods and Services Tax (PGST).\n  - Further improvements recommended in revenue administration: modernize IT systems and build institutional capacity to fully realize benefits of tax reform.\n- Pension and civil service reform:\n  - Welcome commitment to reform the civil service (CSPP) and social security (ROPSSA) pension plan.\n  - Swift implementation of pension reform is key; conduct thorough cost and benefit analysis of design and implementation strategy.\n- Financial sector and domestic intermediation:\n  - Potential to strengthen role of financial system in channeling bank deposits into domestic investment; current credit to the private sector remains limited.\n  - Address financial intermediation challenges: access to credit risk information, caps on commercial lending rates, and legal uncertainties related to land titles to unlock private credit growth.\n  - Modernize the payment system and mobilize domestic savings; tailor reforms to identified use cases and Palau’s economic size and resources.\n- Digital currency and payment innovation:\n  - Recommend a cautious approach to digital initiatives like the tokenized dollar: first address risks and gaps in legal, prudential, and regulatory frameworks.\n  - Near-term focus: prepare a national payment strategy exploring tailored approaches, including the possibility of mobile money.\n- Structural and development priorities:\n  - Structural reforms to diversify the economy and enhance growth potential: implement a high-value tourism strategy, promote foreign investment, attract skilled labor, improve food security, and strengthen climate resilience.\n  - Education: emphasize vocational training and financial literacy.\n  - Update the national development plan to holistically prioritize these reforms to support stronger and more inclusive growth.\n- Financial sector safeguards:\n  - Reforms to modernize the financial system should be tailored to Palau’s specific needs, supported by improved financial literacy, robust regulation and enhanced cyber security measures."
    },
    {
      "heading": "Engagement and acknowledgements",
      "content": "- IMF team exchanged views with government officials, the financial sector, other public institutions, the donor community, and representatives of the private sector in Koror and Airai.\n- The team thanked the authorities and interlocutors for productive discussions and hospitality.\n\nPress Release No. 25/379 — IMF Staff Completes 2025 Article IV Mission to Palau.\n\n---\n\n\n References\n\n- Republic of Palau and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2025/11/19/pr-25379-palau-imf-staff-completes-2025-article-iv-mission"
    }
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    "Published: November 19, 2025",
    "IMF team led by Ms. Yuanyan Sophia Zhang conducted discussions for the 2025 Article IV Consultation from November 6 to 19, 2025.",
    "End-of-mission statement issued as Press Release No. 25/379.",
    "Growth:",
    "Inflation:",
    "Fiscal and debt:",
    "Real GDP:",
    "Labor and wages:",
    "Downside risks:",
    "Upside potential:",
    "Fiscal policy and public debt management:",
    "Revenue and tax administration:",
    "Pension and civil service reform:",
    "Financial sector and domestic intermediation:",
    "Digital currency and payment innovation:",
    "Structural and development priorities:",
    "Financial sector safeguards:",
    "IMF team exchanged views with government officials, the financial sector, other public institutions, the donor community, and representatives of the private sector in Koror and Airai.",
    "The team thanked the authorities and interlocutors for productive discussions and hospitality.",
    "[Republic of Palau and the IMF](http://www.imf.org/external/country/PLW/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/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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