IMF Staff Concludes Visit to the Republic of the Marshall Islands

IMF News, September 17, 2026

Source details

Canonical URL: IMF Staff Concludes Visit to the Republic of the Marshall Islands

Press Release No. 26/292
Mission leader: Ms. Ghada Fayad
Visit dates: September 14-17, 2026
Statement type: End-of-Mission press release (views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board). This mission will not result in a Board discussion.

The energy shock emanating from the war in the Middle East is weighing on the Marshall Islands’ economic activity and adding to existing cost-of-living pressures through higher fuel and electricity costs.
Marshall Islands’ heavy dependence on imported fuel and limited storage capacity increase exposure to commodity price shocks.
Soaring diesel prices, driven by wider refining margins, have increased electricity tariffs.
Projections:
- Growth: 3.1 percent in FY2026, supported by an expansionary fiscal stance reflecting higher social spending and measures to cushion the impact of elevated fuel prices.
- Inflation: expected to rise to 8.5 percent.
Risks: Tilted to the downside, including further increases in energy prices and climate-related shocks.

Authorities’ actions taken:
- Declared a state of economic emergency.
- Introduced energy conservation and fiscal measures to support households and the energy sector.
IMF staff guidance:
- Any additional support should be temporary, well targeted toward vulnerable households, preserve appropriate price signals for energy conservation, and safeguard fiscal sustainability.
- Broad-based support is costly and may weaken incentives for energy conservation.

Completing comprehensive tax reform is critical to modernize the tax system, strengthen domestic revenue mobilization, and support long-term fiscal sustainability.
Implementation priorities as the reform enters a critical phase:
- Finalize remaining regulations.
- Complete taxpayer registration.
- Strengthen compliance capacity.
- Provide additional support to ensure post-launch arrangements align with administrative capacity and taxpayer readiness, including through enhanced taxpayer communication.
Sustained implementation momentum is emphasized as critical to realizing the reform's gains.

Recent developments:
- Social transfers, subsidies, and public employment have expanded significantly in recent years, increasing fiscal costs.
Policy priorities:
- Improve targeting, transparency, and efficiency of social spending.
- Assess social policies within a unified framework to evaluate fiscal, macroeconomic, and distributional impacts.
- Gradually reduce reliance on distortionary subsidies and better target social assistance.
- Avoid expansions that would heighten macro-fiscal risks and increase trade-offs with large development needs.

Current assessment:
- Financial sector remains stable, supported by adequate bank capital and liquidity buffers.
- Financial intermediation remains weak.
- Reliance on a single correspondent banking relationship is an important vulnerability.
Priority actions:
- Bring the Monetary Authority of the Marshall Islands fully into operation.
- Continue implementation of the AML/CFT framework to help strengthen financial resilience and safeguard correspondent banking relationships.
- Strengthen supervisory and governance regimes to identify, assess, and mitigate risks.

Status:
- Work continues on supporting infrastructure and investor outreach for USDM1, the tokenized sovereign digital bond backed by short-term U.S. Treasury securities.
- Current investor base is predominantly domestic.
- Prospect of external issuance remains a key source of concern.
Uncertainties and risks:
- USDM1's contribution to domestic financial inclusion and revenues remains uncertain given digital infrastructure gaps, adoption constraints, questionable demand, and market competition.
- Significant risks include risks to financial integrity that could outweigh expected benefits, particularly given limited capacity.
Policy implication:
- Continued strengthening of supervisory, governance, and AML/CFT regimes remains critical to ensure capacity to manage associated risks.

The IMF team thanked the authorities and counterparts in public enterprises, the private sector, and development partners for open and constructive discussions and looks forward to continuing close engagement with the Republic of the Marshall Islands.

Source: IMF Staff press statement, "IMF Staff Concludes Visit to the Republic of the Marshall Islands", September 17, 2026.