## IMF Staff Completes 2025 Article IV Mission to Palau

_IMF News, November 19, 2025_

## Source details

**Canonical URL:** [IMF Staff Completes 2025 Article IV Mission to Palau](https://www.imf.org/en/news/articles/2025/11/19/pr-25379-palau-imf-staff-completes-2025-article-iv-mission)

## Other formats

- [Markdown version](/en/news/articles/2025/11/19/pr-25379-palau-imf-staff-completes-2025-article-iv-mission/index.md)
- [Structured JSON version](/en/news/articles/2025/11/19/pr-25379-palau-imf-staff-completes-2025-article-iv-mission/index.json)
- [Bundle manifest](/en/news/articles/2025/11/19/pr-25379-palau-imf-staff-completes-2025-article-iv-mission/bundle-manifest.json)

## Bibliographic details
- Published: November 19, 2025

---

### Mission scope and timing
- 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.

### Recent macroeconomic performance and outlook
- Growth:
  - FY2024: 12 percent growth.
  - FY2025: growth expected to have remained robust at 6.7 percent, supported by favorable trends in tourism and construction.
  - FY2026: recovery expected to continue with growth remaining robust, supported by a gradual rebound in tourism, construction and infrastructure investment.
- Inflation:
  - FY2025: inflation at 0.2 percent.
  - Medium term: inflation expected to rise from 0.2 percent in FY2025 and stabilize around 2 percent.
- Fiscal and debt:
  - Public debt declined from a peak of 81 percent to 67 percent of GDP by the end of FY2024.
  - Fiscal balances improved: fiscal deficits have turned into surpluses due to economic recovery, increased grants, successful tax reform, and spending restraint.
- Real GDP:
  - Real GDP remained below pre-pandemic levels in FY2024 despite rebound.
- Labor and wages:
  - Minimum wage increases have helped real wages recover to their pre-pandemic trend.

### Risks and upside factors
- Downside risks:
  - Geopolitical tensions and global policy uncertainty could slow tourism activity, disrupt foreign investment, and affect donor support.
  - Exposure to global shocks and extreme weather events.
- Upside potential:
  - Swift parliamentary approval of the full FY2026 budget could boost confidence and improve the outlook.

### Policy findings and recommendations
- Fiscal policy and public debt management:
  - Maintain fiscal prudence and preserve buffers through effective implementation of a medium-term fiscal strategy.
  - 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.
  - Extended grant from the renewed COFA agreement presents an important opportunity to prioritize reducing debt obligations and enhance resilience.
- Revenue and tax administration:
  - Commendation for successful implementation of tax reform, including rollout of the Palau Goods and Services Tax (PGST).
  - Further improvements recommended in revenue administration: modernize IT systems and build institutional capacity to fully realize benefits of tax reform.
- Pension and civil service reform:
  - Welcome commitment to reform the civil service (CSPP) and social security (ROPSSA) pension plan.
  - Swift implementation of pension reform is key; conduct thorough cost and benefit analysis of design and implementation strategy.
- Financial sector and domestic intermediation:
  - Potential to strengthen role of financial system in channeling bank deposits into domestic investment; current credit to the private sector remains limited.
  - 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.
  - Modernize the payment system and mobilize domestic savings; tailor reforms to identified use cases and Palau’s economic size and resources.
- Digital currency and payment innovation:
  - Recommend a cautious approach to digital initiatives like the tokenized dollar: first address risks and gaps in legal, prudential, and regulatory frameworks.
  - Near-term focus: prepare a national payment strategy exploring tailored approaches, including the possibility of mobile money.
- Structural and development priorities:
  - 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.
  - Education: emphasize vocational training and financial literacy.
  - Update the national development plan to holistically prioritize these reforms to support stronger and more inclusive growth.
- Financial sector safeguards:
  - 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.

### Engagement and acknowledgements
- 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.

*Press Release No. 25/379 — IMF Staff Completes 2025 Article IV Mission to Palau.*

---


## References

- [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)

_Source: https://www.imf.org/en/news/articles/2025/11/19/pr-25379-palau-imf-staff-completes-2025-article-iv-mission_