Kiribati Economic & Development Strategy Handbook

Papua New Guinea showed solid economic growth, supported by greater political stability, fiscal framework, and a healthy banking sector. Executive Directors encouraged the authorities to consider tighter macroeconomic policies in the face of rising inflation pressures and also stressed the need of a tight fiscal policy. They welcomed the Sovereign Wealth Funds (SWF), and considered it important to integrate the use of resources in the SWF into the budget and macroeconomic framework, supported by strong fiscal institutions. Directors observed that Liquefied Natural Gas (LNG) and other resource projects provide an opportunity to raise long-term growth and living standards.

This 2017 Article IV Consultation highlights that the economy of the Solomon Islands grew by 3.5 percent in 2016 driven by a peak in the forestry sector. Growth remained solid in 2017 and is projected at 3.0 for 2018, buoyed by infrastructure spending, fisheries and agriculture, although logging production is slowing down. Inflation is contained at an annual rate of just 1.6 percent in October 2017. The current account deficit has widened a little but international reserves levels are comfortable. The fiscal deficit is expected to have reached 4.0 percent of GDP in 2017 and to widen further in 2018. The risks to the economy are on the downside with the weakening fiscal position heightening vulnerability to shocks.

The staff report highlights that the economy of Kiribati showed resilience from the global crisis owing to infrastructure projects financed by foreign assistance. Executive Directors stressed the importance of preserving real per capita value of the Revenue Equalization Reserve Fund to ensure fiscal sustainability and intergenerational fairness. They appreciated the multiyear budget framework, which helped in designing realistic fiscal plans. Directors noted the joint IMF-World Bank debt sustainability analysis and encouraged authorities to secure grant financing to support the country’s development needs.

The economy of the Republic of the Marshall Islands has experienced a strong recovery with a 5.2 percent growth in 2010 following strong improvement in the fisheries sector and a moderate recovery in exports. The financial sector remained focused on consumer lending and contributed little to overall economic growth. Although the financial sector remained profitable, much of the rapid growth in credit has been in consumer loans. The authorities are monitoring high levels of household debt and intend to begin work on strengthening the regulatory framework.