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