Cook Islands’ Debt Repayment Plan Targets 0.4% of GDP
Wellington, New Zealand - A Crucial Step Towards Fiscal Sustainability
The Cook Islands government has announced plans to use funds from its stabilization account to repay debt, aiming to reduce the country’s debt-to-GDP ratio by approximately 0.4 percentage points.
Comprehensive Review of Public Financial Management System
As part of a comprehensive review of the country’s public financial management system, expected to be completed in 2019, the government aims to improve economic and administrative efficiency. The review will focus on developing a Cook Islands Revenue Strategy.
Budget Report: NZ$56.7 Million Set Aside for Debt Repayment
According to the government’s latest budget report, NZ$56.7 million has been set aside for debt repayment in the 2019/20 fiscal year. This move is seen as a crucial step towards restoring the country’s fiscal sustainability, which was severely impacted by a debt crisis in the 1990s.
Public Sector Gross Debt: NZ$110.8 Million
The Cook Islands’ public sector gross debt currently stands at NZ$110.8 million, with the majority of it held by the Asian Development Bank (74%) and the Export/Import Bank of China (24%). The government aims to reduce this debt-to-GDP ratio from its current level of around 19% to a more sustainable 15%.
Implementation of Fiscal Reforms
To achieve this goal, the government will need to implement fiscal reforms and improve its public financial management system. This includes:
- Reviewing the country’s revenue regime
- Developing a single platform for financial management information systems
- Increasing transparency in budget execution
IMF Praises Cook Islands’ Efforts
The International Monetary Fund (IMF) has praised the Cook Islands’ efforts to restore fiscal sustainability, citing the country’s “strong adherence to fiscal rules” as a key factor in its success. However, the IMF also highlighted the need for further reforms to improve public administration capacity and address vulnerabilities in the debt structure.
Alternative Scenarios
In an effort to build resilience and reduce the risk of debt distress, the government is exploring alternative scenarios, including a constant primary balance scenario that assumes no new borrowing. Under this scenario, the debt ratio could rise rapidly to unsustainable levels if downside risks materialize.
Implications for Economy
The Cook Islands’ debt repayment plan is expected to have significant implications for the country’s economy and will be closely watched by international investors and financial institutions.