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Tuvalu: IMF Staff Report - Navigating Uncertainty in a Post-Pandemic World

Outlook and Risks

The outlook for Tuvalu remains uncertain due to the ongoing COVID-19 pandemic and its effects on the economy. The risks are tilted to the downside, with potential delays in resuming infrastructure projects and private sector activity.

  • Potential impacts:
    • Delayed reform priorities with donors
    • Changes in weather patterns affecting tuna stocks
    • Unforeseen drop in returns from the Tuvalu Trust Fund

Government Views

The authorities broadly agree with the staff’s assessment of the macroeconomic outlook and risks. They note that travel restrictions pose risks to seasonal worker schemes with Australia and New Zealand, potentially impacting household incomes.

  • Government priorities:
    • Receiving further vaccine allotments for full inoculation and border opening

Fiscal Outlook

The authorities expect more favorable fiscal outturns due to continued close collaboration with development partners and budget support grants as planned. They also expect some underspending of both the current and capital budgets, leading to a small budget surplus for 2021.

  • Key factors:
    • Collaboration with development partners
    • Budget support grants

Securing Green and Sustainable Recovery

To recover from the pandemic, the government should focus on:

  1. Continuing fiscal support to vulnerable populations and private sector.
  2. Working with development partners to secure additional vaccines and medical equipment needed for inoculations.
  3. Maintaining buffers given uncertainty surrounding the pandemic.
  4. Conducting COVID-related spending in line with procurement rules and publishing details on the website of the Ministry of Finance.

Recommendations

The IMF staff recommends that Tuvalu:

  1. Continue to implement fiscal measures aimed at supporting vulnerable populations and private sector.
  2. Seek flexibility in using remaining grants from development partners.
  3. Maintain buffers given uncertainty surrounding the pandemic.
  4. Conduct audits of COVID-related spending to improve transparency and accountability.

Conclusion

The report highlights the need for Tuvalu to be prepared for various risks and uncertainties related to the ongoing pandemic, while also working towards a green and sustainable recovery.