IMF Staff Visit Report: Nauru
Economic and Social Situation
Nauru, a small island nation in the Pacific, faces significant economic and social challenges. This report from the International Monetary Fund (IMF) provides an assessment of the country’s situation and recommends structural reforms to support its development.
Key Challenges
- Economic challenges: Nauru has a large budget deficit, high debt levels, and a limited tax base.
- Human capital: The country has a young population, but education spending should prioritize improving enrollment and attendance rates, as well as increasing the teacher-to-student ratio.
- Climate change: Nauru is vulnerable to climate change, with long-term challenges remaining significant despite progress in adaptation and mitigation efforts.
- Structural reforms: The completion of a new port and related infrastructure could bring new sources of growth and employment opportunities, while increased participation in regional labor mobility schemes could help increase remittances.
- Governance and corruption: Nauru needs to strengthen fiscal governance, the rule of law, and investor protection to reduce vulnerabilities to corruption and support growth.
Recommendations for Reforms
The IMF staff recommends that the authorities:
- Improve the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) framework, including by formalizing fiscal responsibility ratios with a well-designed fiscal rule.
- Strengthen internal controls for non-salary expenditures and improve transparency of budget information.
Support from the IMF
The IMF stands ready to support the authorities in implementing reforms through policy advice and capacity development engagement.