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Asia and Pacific > Marshall Islands, Republic of the

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Cover IMF Staff Country Reports
Republic of the Marshall Islands: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Republic of the Marshall Islands
International Monetary Fund. Asia and Pacific Dept
Real GDP declined by 4.5 percent in FY2022 due entirely to a decline in fisheries. However, excluding the sector, growth was 4.2 percent, fueled by a recovery in domestic demand. Inflation has picked up due to higher food and fuel prices, while the current account surplus narrowed as COVID-related grants declined and the trade deficit widened.
Keywords:
authorities in the Republic of Marshall Islands; government benefit; RMI article; RMI parliament's review; RMI authorities; Debt sustainability analysis; Debt sustainability; Climate change; Global; Asia and Pacific; Pacific Islands
Cover Departmental Papers
Funding the Future: Tax Revenue Mobilization in the Pacific Island Countries
Mouhamadou Sy, Mr. Andrew Beaumont, Enakshi Das, Mr. Georg Eysselein, Mr. David Kloeden, and Katrina R Williams
Pacific Island Countries (PICs) face daunting spending needs related to achieving the UN Sustainable Development Goals (SDGs) and adapting to the effects of climate change. Boosting tax revenues will need to be an essential pillar in creating the fiscal space to meet SDG and climate-adaptation spending needs. This paper assesses the additional tax revenue that PICs could potentially collect and discusses policy options to achieve such gains. The main objectives of the paper are to (1) review the critical medium-term development spending requirements and available financing options, (2) document the main stylized facts about tax revenues in the PICs and estimate the additional tax revenue that countries could raise, (3) highlight the main bottlenecks preventing the PICs from further increasing their tax revenue collection with an emphasis on weaknesses in VAT systems, (4) draw lessons from successful emerging and developing countries that have managed to substantially and durably increased their tax revenues, and (5) propose tax policy and revenue administration reform priorities for Pacific Island Countries to boost tax revenues. The paper’s main findings are (1) The current revenue mix is skewed toward non-tax revenues, (2) PICs could collect an additional 3 percent of tax revenue in the short to medium term, (3) Many bottlenecks are preventing the PICs from boosting their tax revenue collection, and (4) The potential offered by efficient VAT systems is not fully exploited. To increase tax revenue in the Pacific Islands, the paper proposes the following reforms: (1) unwinding recent fiscal relief measures, (2) strengthening or introducing a VAT system; (3) rationalizing tax exemptions, (4) closing loopholes in the tax system, (5) reforming tax administration, and (6) introducing a medium-term revenue strategy.
Keywords:
Domestic resource mobilization; Pacific Island Countries; Value added tax; tax policy; tax administration; tax exemptions; tax exemption; Revenue administration measure; VAT system; B. VAT potential; Revenue administration reform; Value-added tax; Tax administration core functions; Revenue mobilization; Consumption taxes; Pacific Islands; Asia and Pacific
Cover IMF Staff Country Reports
Republic of the Marshall Islands: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Republic of the Marshall Islands
International Monetary Fund. Asia and Pacific Dept
Strong and timely containment measures have successfully prevented a domestic COVID-19 outbreak but have also weighed on economic activity. The real GDP is estimated to have contracted by 3.3 percent in FY2020 and is projected to further decline by another 1.5 percent in FY 2021 due to continued travel restrictions. Economic activity is expected to pick up in FY2022, as COVID-related restrictions will be relaxed gradually. The government is currently negotiating the renewal of Compact of Free Association (COFA) financial provisions with the United States, but terms remain uncertain. The government is considering to repeal the SOV Act and a bill on establishing a Digital Economic Zone was submitted to the Parliament recently.
Keywords:
RMI authorities; authorities in the Republic of Marshall Islands; government banking services; RMI's economy; fund CD; COVID-19; Natural disasters; Debt sustainability analysis; Pacific Islands; Global
Cover IMF Working Papers
Fiscal Buffers for Natural Disasters in Pacific Island Countries
Hidetaka Nishizawa, Mr. Scott Roger, and Huan Zhang
Pacific island countries (PICs) are vulnerable severe natural disasters, especially cyclones, inflicting large losses on their economies. In the aftermath of disasters, PIC governments face revenue losses and spending pressures to address post-disaster relief and recovery efforts. This paper estimates the effects of severe natural disasters on fiscal revenues and expenditure in PICs. These are combined with information on the frequency of large disasters to calculate the rate of budgetary savings needed to build appropriate fiscal buffers. Fiscal buffers provide self-insurance against natural disaster shocks and facilitate quick disbursement for recovery and relief efforts, and protection of spending on essential services and infrastructure. The estimates can provide a benchmark for policymakers, and should be adjusted to take into account other sources of financing, as well as budget risks from less severe as well as more frequent disasters.
Keywords:
WP; private sector; real GDP; government expenditure; Natural Disasters; Pacific Islands Countries; Fiscal Cost; Fiscal Buffers; PIC government; contingent government liability; government cash buffer; government financing source; financial support; Fiscal space; Disaster aid; Budget planning and preparation; Pacific Islands
Cover Policy Papers
A Strategy for IMF Engagement on Social Spending: Background Papers
International Monetary Fund. Fiscal Affairs Dept., International Monetary Fund. Strategy, Policy, &, and Review Department
This Supplement presents an account of the extensive consultations and the results of various analyses that supported the development of “A Strategy for IMF Engagement on Social Spending.”
Keywords:
PP; spending; staff report; staff; IMF staff calculation; spending issue; social spending; IMF program; Health care spending; Education spending; Personal income; Total expenditures; Global; Sub-Saharan Africa; Asia and Pacific; Europe
Cover IMF Staff Country Reports
Republic of the Marshall Islands: Selected Issues
International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper discusses correspondent banking relationships (CBRs) pressures on the Republic of the Marshall Island (RMI). RMI’s two banks currently have access to the US financial system. The Bank of the Marshall Islands is a domestic financial institution providing banking services to a substantial portion of the population and operates five branches throughout RMI, including on the Kwajalein Atoll. RMI, through the Trust Company of the Marshall Islands, provides offshore corporate and maritime registry services. Weak implementation of the anti-money laundering and combating the financing of terrorism (AML/CFT) framework by the authorities contributes to CBR pressures in RMI. The termination of BOMI’s CBR with First Hawaiian Bank would be expected to have significant negative economic repercussions without alternative arrangements. The RMI authorities are strengthening the effectiveness of the AML/CFT framework. Additional steps should be taken to further lower the risk of losing the last US dollar CBR. Once the national risk assessment is completed, an action plan should be developed to address the identified risks.
Keywords:
ISCR; CR; RMI authorities; RMI authority; SOV issuance; CFT measure; SOV supply; SOV volatility; RMI exchange; BNP Paribas; due diligence; RMI registry; RMI parliament; RMI resident; SOV unit; dollarized economy; Virtual currencies; Anti-money laundering and combating the financing of terrorism (AML/CFT); Currencies; Correspondent banking; Blockchain and DLT; Global
Cover IMF Staff Country Reports
Republic of the Marshall Islands: 2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of the Marshall Islands
International Monetary Fund. Asia and Pacific Dept
This 2018 Article IV Consultation highlight that growth in the Marshallese economy is estimated to have accelerated to about 3.5 percent in FY2017 (ending September 30) with a strong pick-up in fisheries and construction, with the latter owing to the resumption of infrastructure projects. Consumer prices started to rise again in mid-2017, with annual consumer price index inflation at 1.1 percent in 2017Q4. Growth is expected to remain robust at about 2.5 percent in FY2018 and about 1.5 percent over the medium term, underpinned by further increases in infrastructure spending. Inflation is expected to rise gradually to about 2 percent over the medium term.
Keywords:
ISCR; CR; FY2017; government; staff appraisal; Marshallese authorities; data release; RMI authorities; authorities in the Republic of Marshall Islands; Natural disasters; Anti-money laundering and combating the financing of terrorism (AML/CFT); Climate change; Pacific Islands; Global
Cover IMF Working Papers
Self-insurance Against Natural Disasters: The Use of Pension Funds in Pacific Island Countries
Mr. Si Guo and Mr. Futoshi Narita
Pacific island countries are exposed to significant risks from natural disasters. As a disaster relief measure, Fiji allowed pre-retirement pension withdrawls in the wake of Cyclone Winston in 2016. Motivated by this policy action, we provide a normative analysis of the use of early pension withdrawals after disasters, by setting up a life-cycle saving model with myopic households facing large natural disaster shocks. The model demonstrates the key trade-off between building up sufficient retirement savings and ensuring the access to savings against natural disaster shocks, and sheds light on welfare implications of early pension withdrawals.
Keywords:
WP; saving; withdrawal; pension saving; Fiji; amount; Insurance; Life-cycle model; Natural disasters; Pension; Small states; pension savings; one-off withdrawals assistance; withdrawal policy; contribution rate; pension withdrawals assistance; saving path; payment calculation; Pensions; Pension spending; Retirement; Consumption; Pacific Islands
Cover IMF Working Papers
The Economic Impact of Natural Disasters in Pacific Island Countries: Adaptation and Preparedness
Dongyeol Lee, Huan Zhang, and Chau Nguyen
Pacific island countries are highly vulnerable to various natural disasters which are destructive, unpredictable and occur frequently. The frequency and scale of these shocks heightens the importance of medium-term economic and fiscal planning to minimize the adverse impact of disasters on economic development. This paper identifies the intensity of natural disasters for each country in the Pacific based on the distribution of damage and population affected by disasters, and estimates the impact of disasters on economic growth and international trade using a panel regression. The results show that “severe” disasters have a significant and negative impact on economic growth and lead to a deterioration of the fiscal and trade balance. We also find that the negative impact on growth is stronger for more intense disasters. Going further this paper proposes a simple and consistent method to adjust IMF staff’s economic projections and debt sustainability analysis for disaster shocks for the Pacific islands. Better incorporating the economic impact of natural disasters in the medium- and long-term economic planning would help policy makers improve fiscal policy decisions and to be better adapted and prepared for natural disasters.
Keywords:
WP; GDP growth; percentile rank; balance-to-GDP ratio; estimation result; Natural Disaster; Growth; Fiscal Balance; International Trade; Debt Sustainability; coefficient estimate; disaster year; mass movement; Natural disasters; Fiscal stance; Trade balance; Debt sustainability analysis; Pacific Islands
Cover IMF Working Papers
Challenges in Correspondent Banking in the Small States of the Pacific
Jihad Alwazir, Mr. Fazurin Jamaludin, Dongyeol Lee, Niamh Sheridan, and Ms. Patrizia Tumbarello
Access to financial services in the small states of the Pacific is being eroded. Weaknesses in Anti-Money Laundering and Combating the Financing of Terrorism compliance in the context of high levels of remittances are contributing to banks’ decisions to withdraw corresponding banking relationships and close bank accounts of money transfer operators. In this paper, we gather evidence on these developments in the small states of the Pacific, discuss the main drivers, and the potentially negative impact on the financial sector and macroeconomy. We then identify the collective efforts needed to address the consequences of withdrawal of corresponding banking relationships and outline policy measures to help the affected countries mitigate the impact.
Keywords:
WP; remittance sector; respondent bank; average cost; bank Pacific; central bank; Pacific islands; small states; correspondent banking; remittances; AML/CFT; digital economy; bank South Pacific; Marshall Island bank; small states of the Pacific; due diligence; money transfer operators; MTO bank accounts; KYC remittance recipient; Anti-money laundering and combating the financing of terrorism (AML/CFT); Fiscal accounting and reporting; Money laundering; Global; Australia and New Zealand; Asia and Pacific