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International Monetary Fund. Asia and Pacific Dept

IMF Country Report No. 21/176

International Monetary Fund. Asia and Pacific Dept
Swift implementation of containment measures, limited spillovers from tourism, and COVID-related fiscal spending financed by buoyant fishing revenues and donor grants have allowed Tuvalu—a fragile Pacific micro-state—avoid a recession in 2020. The economy is expected to expand by 2.5 percent in 2021, supported by fiscal expenditures and resumption of infrastructure projects. But significant challenges remain: Tuvalu is vulnerable to the effects of climate change, its economy is dominated by the public sector, and its revenue base is narrow. Uncertainty around donor commitments complicates fiscal planning.
International Monetary Fund. Asia and Pacific Dept

Our Tuvaluan authorities are deeply appreciative of the open and useful engagement with the mission team during the 2021 Article IV virtual consultations. The authorities broadly concur with staff’s assessment and their analysis and tailored policy recommendations.

International Monetary Fund. Asia and Pacific Dept

1. Tuvalu—a fragile South Pacific micro-state—encountered the pandemic following a period of relatively strong growth. The economy expanded 6.3 percent on average between 2017–2019, reflecting high public spending on infrastructure and new housing prior to the 2019 Pacific Islands Forum, and an elevated public sector wage bill. Close engagement with donors, guided by the mutually-agreed reform agenda outlined in the Policy Reform Matrix (PRM) helped ensure the steady inflow of budget support grants. Infrastructure investment funded by donors also contributed to growth. Due to buoyant fishing revenues and grants, Tuvalu’s budget registered surpluses in most years, leaving its fiscal buffers well replenished and debt levels low ahead of the pandemic. The authorities also made progress on public financial management reforms.

International Monetary Fund. Asia and Pacific Dept

Tuvalu is a fragile micro state. The country's remoteness, narrow production base, and weak banking sector constrain private sector activity.

International Monetary Fund. Asia and Pacific Dept
Tuvalu is a fragile micro state. The country’s remoteness, narrow production base, and weak banking sector constrain private sector activity, leaving public expenditure as the main source of growth. The DSA finds that Tuvalu remains at high risk of debt distress.
International Monetary Fund. Asia and Pacific Dept

Tuvalu is a fragile micro state. The country's remoteness, narrow production base, and weak banking sector constrain private sector activity.

International Monetary Fund. Asia and Pacific Dept

Tuvalu is a fragile micro state. The country's remoteness, narrow production base, and weak banking sector constrain private sector activity.