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Asia and Pacific > Vanuatu

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Cover Technical Notes and Manuals
User Manual for the DIGNAD Toolkit
Mr. Zamid Aligishiev, Cian Ruane, and Azar Sultanov
This note is a user’s manual for the DIGNAD toolkit, an application aimed at facilitating the use of the DIGNAD model (Debt-Investment-Growth and Natural Disasters) by economists with no to little knowledge of MATLAB and Dynare via a user-friendly Excel-based interface. DIGNAD is a dynamic general equilibrium model of a small open economy developed at the International Monetary Fund. The model can help economists and policymakers with quantitative assessments and policy scenario analysis of the macrofiscal effects of natural disasters and adaptation infrastructure investments in low-income developing countries and emerging markets. DIGNAD is tailored to disaster-prone countries, which typically are small countries or low-income countries that are particularly exposed to large climate shocks—countries where shocks that can disrupt the entire economy are frequent. However, DIGNAD can be relevant also for larger countries that may potentially be exposed to extreme climatic disasters in the future.
Keywords:
natural disasters; adaptation; resilient infrastructure; public investment; public investment efficiency; debt sustainability; DIGNAD toolkit; IMF copyright; DIGNAD model; GNU General Public License; third-party software; Infrastructure; Public investment spending; Total factor productivity; Depreciation; Sub-Saharan Africa
Cover Policy Papers
Implementation Plan in Response to the Board-Endorsed Recommendations from the IEO Evaluation Report on IMF Engagement with Small Developing States
International Monetary Fund
This paper presents a Management Implementation Plan (MIP) with actions to take forward the Board-endorsed recommendations from the Independent Evaluation Office (IEO)’s report on IMF Engagement with Small Developing States (SDS). The actions in the MIP are broad in scope, touching on all modalities of the Fund’s engagement with SDS, and seek to be comprehensive, self-reinforcing, cost-effective, and designed to be adopted as a package. The MIP aims to support a targeted and effective recalibration of engagement with SDS; enhance IMF’s surveillance and capacity development in SDS members; strengthen the Fund’s lending engagement with SDS, in line with the applicable policy frameworks; and secure an effective, well-tailored and more continuous staff presence in SDS.
Keywords:
Capacity development; climate; lending; policy frameworks; training; small developing states; staffing; surveillance; SDS staff guidance note; SDS member; SDS-SGN update; presence in SDS; IMF's transparency policy; Climate change; Budget planning and preparation; Financial sector; Caribbean; Global; Central America
Cover IMF Staff Country Reports
Vanuatu: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Vanuatu
International Monetary Fund. Asia and Pacific Dept
This 2023 Article IV Consultation discusses that following a successful coronavirus disease 2019 containment strategy, the border reopened in July 2022, and tourism is returning to Vanuatu. Economic activity is expected to be strong in the near term, with real gross domestic product growing around 3.4 percent in 2023, as tourism and construction activities resume. High imported prices are likely to stoke inflation and push the current account into deficit, while fiscal policy will turn more expansionary. The report recommends capitalizing on the recovery to adopt a credible medium-term fiscal strategy, consolidate, and enact meaningful reforms. The strategy should contain new revenue mobilization policies, including a well-designed income tax, and an expenditure rationalization agenda, while protecting productive and climate-critical infrastructure spending. Coordination toward careful calibration of an appropriate fiscal and monetary policy mix is needed to keep inflation under control while supporting growth. The exchange rate should continue to act as a shock absorber.
Keywords:
staff appraisal; reconstruction effort; fuel shortage; money market rate; baseline projection; liability positions vis-à-vis nonresident; ECP revenue; Natural disasters; External sector statistics; Anti-money laundering and combating the financing of terrorism (AML/CFT); Global; Pacific Islands; Australia and New Zealand; Asia and Pacific
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 Working Papers
Growth at Risk from Natural Disasters
Mr. Tamim Bayoumi, Mr. Saad N Quayyum, and Sibabrata Das
The paper analyzes the impact of natural disasters on per-capita GDP growth. Using a quantile regressions and growth-at-risk approach, the paper examines the impact of disasters and policy choices on the distribution of growth rather than simply its average. We find that countries that have in place disaster preparedness mechanisms and lower public debt have lower probability of witnessing a significant drop in growth as a consequence of a natural disaster, but our innovative methodology in this paper finds that the two policies are complements since their effectiveness vary across different disaster scenarios. While both are helpful for small to mid-size disasters, lower debt—and hence more fiscal space—is more beneficial in the face of very large disasters. A balanced strategy would thus involve both policies.
Keywords:
disaster preparedness; impact of disaster; quantile regression; impact of natural disaster; regression estimator; Natural disasters; Fiscal space; Caribbean
Cover IMF Staff Country Reports
Vanuatu: 2021 Article IV Consultation -Press Release; Staff Report; and Statement by the Executive Director for Vanuatu
International Monetary Fund. Asia and Pacific Dept
Border closures and other pandemic containment measures have kept Vanuatu free from COVID-19. However, they have dealt a heavy blow to economic activity as tourism has come to a virtual halt. On top of the pandemic, Tropical Cyclone Harold and a volcanic eruption in Tanna Island caused extensive economic damage in 2020. In the context of a continued loss of correspondent banking relationships (CBRs) in the Pacific, Vanuatu also lost a key CBR at end-June 2021. Air Vanuatu, one of the state-owned enterprises (SOEs), is in the process of being restructured.
Keywords:
Vanuatu economy; Vanuatu authorities; authorities in Vanuatu; liability positions vis-à-vis nonresident; money market rate; Natural disasters; Anti-money laundering and combating the financing of terrorism (AML/CFT); External sector statistics; Pacific Islands; Global
Cover IMF Working Papers