IMF Executive Board Concludes 2026 Article IV Consultation with The Federated States of Micronesia
IMF News, May 5, 2026
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- Published: May 5, 2026
Growth, inflation, and near-term outlook
- Growth is expected to moderate to 0.7 percent in FY2026 as real income compression and elevated import costs weigh on activity.
- Inflation is projected at 3.2 percent in 2026 reflecting gradual passthrough of higher oil prices due to the conflict in the Middle East.
- Recent historical and projected real GDP (annual percent change):
- FY2023: 1.1
- FY2024: 2.3
- FY2025: 1.1
- FY2026: 0.7
- FY2027: 1.4
- FY2028: 1.0
- Recent inflation (consumer prices, annual percent change):
- FY2022: 5.0
- FY2023: 6.2
- FY2024: 5.4
- FY2025: 3.2
- FY2026: 4.0
- FY2027: 1.7
- FY2028: 2.0
- Drivers:
- Downside pressures: real income compression, higher import costs (notably for the relatively fuel intensive fishing sector).
- Support to activity: gradual pickup in public investment funded by the Compact of Free Association with the United States.
- Risks: slower than envisaged implementation of infrastructure projects, intensifying climate change, prolonged conflict.
- Upside: reforms to ease bottlenecks could ignite private sector activity, create jobs and reduce aid dependency.
Fiscal position, public investment, and trust funds
- Fiscal developments:
- Fiscal surplus narrowed as revenues normalized following windfall gains and states increased expenditure in response to a greater share of fishing fees.
- Public debt declined to 8.9 percent of GDP in FY2025.
- Trust funds and public investment:
- Balance of trust funds (Compact Trust Fund and FSM Trust Fund) reached 509.6 percent of GDP in FY2025.
- Balance of trust funds time series (percent of GDP):
- FY2022: 298.1
- FY2023: 325.6
- FY2024: 412.9
- FY2025: 509.6
- FY2026: 517.3
- FY2027: 518.2
- FY2028: 528.4
- FY2029: 539.2
- FY2030: 551.5
- FY2031: 563.0
- Gross Public Investment (percent of GDP):
- FY2022: 5.9
- FY2023: 7.3
- FY2024: 9.0
- FY2025: 8.3
- FY2026: 10.2
- FY2027: 18.0
- FY2028: 18.1
- FY2029: 14.5
- FY2030: 12.5
- FY2031: (not provided)
- Consolidated government finance highlights (percent of GDP):
- Revenue and grants:
- FY2022: 76.1
- FY2023: 61.3
- FY2024: 61.5
- FY2025: 60.6
- FY2026: 62.4
- FY2027: 66.6
- FY2028: 69.3
- Revenue:
- FY2022: 47.5
- FY2023: 32.2
- FY2024: 32.3
- FY2025: 32.9
- FY2026: 32.4
- Grants:
- FY2022: 28.6
- FY2023: 29.1
- FY2024: 29.2
- FY2025: 27.7
- FY2026: 29.9
- Expenditure:
- FY2022: 59.4
- FY2023: 63.2
- FY2024: 59.8
- FY2025: 60.2
- FY2026: 62.0
- Net acquisition of nonfinancial assets:
- FY2022: 0.4
- FY2023: 2.1
- FY2024: 4.4
- FY2025: 3.9
- FY2026: 6.1
External sector, financial sector, and macro indicators
- Balance of payments (millions of U.S. dollars):
- Trade balance:
- FY2022: -183.8
- FY2023: -189.2
- FY2024: -207.7
- FY2025: -204.3
- FY2026: -227.4
- Net services and income:
- FY2022: 34.1
- FY2023: 21.4
- FY2024: 17.9
- FY2025: 10.5
- FY2026: 12.1
- Private and official transfers:
- FY2022: 218.3
- FY2023: 192.1
- FY2024: 206.5
- FY2025: 212.7
- FY2026: 221.0
- Current account (millions of U.S. dollars):
- FY2022: 68.6
- FY2023: 24.4
- FY2024: 16.6
- FY2025: 5.7
- FY2026: -2.2
- Current account (percent of GDP):
- FY2022: 16.5
- FY2023: 5.5
- FY2024: 3.5
- FY2025: 3.8
- FY2026: -0.4
- External debt (millions of U.S. dollars; outstanding stock, end of period):
- FY2022: 49.8
- FY2023: 45.3
- FY2024: 40.2
- FY2025: 35.1
- FY2026: 37.0
- Financial sector and banking (percent of GDP; end of period):
- Loans:
- FY2022: 13.2
- FY2023: 10.3
- FY2024: 10.6
- FY2025: 10.8
- FY2026: 11.2
- Deposits:
- FY2022: 103.1
- FY2023: 100.0
- FY2024: 92.0
- FY2025: 96.4
- FY2026: 94.3
- Other macro indicators:
- Nominal GDP (in millions of U.S. dollars):
- FY2022: 415.2
- FY2023: 443.0
- FY2024: 481.1
- FY2025: 501.8
- FY2026: 521.3
- Real effective exchange rate (calendar year, 2010=100):
- FY2023: 108.0
- FY2024: 115.1
- FY2025: 126.1
- FY2026: 136.3
Key policy recommendations and priorities
- Expedite climate-resilient public investment and improve project quality, with the support of development partners.
- Build consensus to reignite reforms that would support a vibrant private sector and help create high-quality jobs.
- Carefully balance the medium-term fiscal strategy to preserve fiscal buffers while financing development goals and climate adaptation needs.
- Anchor fiscal policy in a credible medium-term framework and strengthen public financial and investment management, particularly at the state level.
- Foster private sector investments and strengthen revenue mobilization, including plans to modernize the tax system.
- Continue reliance on grants and concessional borrowing to safeguard long-term fiscal sustainability; prudent use of trust funds to finance public investment is appropriate.
- Strengthen monitoring of the financial sector given a recent increase in nonperforming loans; promote financial deepening through digital banking and measures to close information gaps.
- Strengthen coordination across national and state governments to accelerate structural reforms, including streamlining laws and regulations related to foreign direct investment, business regulations, and land use.
- Support job creation and address skill mismatches to mitigate emigration pressures.
- Integrate climate‑specific provisions in infrastructure planning and continue improvements in disaster risk financing layering and development of the National Adaptation Plan.
- Support effective decision‑making through timely publication of statistics.
Executive Board assessment and next steps
- Executive Directors agreed with the thrust of the staff appraisal and highlighted the country’s progress on development goals, under challenging circumstances.
- Directors welcomed the renewal of the Compact of Free Association but noted medium‑term growth prospects remain subdued due to capacity constraints, sustained emigration, and intensifying effects of climate change.
- Directors underscored the importance of IMF and development partner support to strengthen capacity and reform implementation.
- It is expected that the next Article IV consultation with the Federated States of Micronesia will be held on a 24‑month cycle.
Snapshot statistics (selected)
- Nominal GDP (FY2023): US$443 million
- Population (FY2023): 94,654
- GDP per capita (FY2023): US$4,680
- IMF Quota: SDR 7.2 million
- Public debt (FY2025): 8.9 percent of GDP
- Balance of trust funds (FY2025): 509.6 percent of GDP
Source: IMF Executive Board Concludes 2026 Article IV Consultation with The Federated States of Micronesia (Press Release No. 26/138; May 5, 2026).