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International Monetary Fund. Asia and Pacific Dept
The 2024 Article IV Consultation highlights that as Vanuatu was recovering from the multiple natural disasters of 2023, the voluntary liquidation of Air Vanuatu in May 2024 created a major shock with significant effects on growth and business confidence. There is a strong need to address immediate risks to growth and stability, and then redouble efforts to rebuild buffers and tackle structural issues with policy reforms. Fiscal challenges abound and call for urgent and comprehensive action. In the near term, targeted and strategic support is needed to help stabilize the economy, while ensuring fiscal accounts remain under control. Monetary policy is appropriately accommodative but monetary financing needs to be reduced and eventually stopped. The currency basket needs close monitoring. Structural issues remain ever important, and action is needed such as reprioritization of investment needs and integration to the medium-term fiscal strategy, and an increase in efforts to address labor shortages and skills drain.
International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper discusses sea-level rise impacts and adaptation in Vanuatu. Sea-level will continue to increase during this century directly caused by global warming and melting of terrestrial ice. While Vanuatu cannot control global sea-level, it can manage how it affects the country by adapting. Staff analysis estimates the cost of sea-level rise under alternative adaptation strategies: (1) no-adaptation; (2) protection; and (3) planned retreat. Such analysis can help the government to identify trade-offs between efficiency and equity, and choose according to the preferences of the population, consistent with public finance objectives. Preliminary results show that complete protection of coastal areas in Vanuatu is costly while planned retreat from the coastline is the least-cost adaptation response. However, given the mountainous nature of the islands, only small areas of the main population centers of Port Vila and Luganville are at risk of being permanently inundated even with very high sea level rise.
Yong Sarah Zhou
,
Tao Sun
,
Anca Paduraru
,
Arvinder Bharath
,
Stephanie Forte
,
Kathleen Kao
,
Yinqiu Lu
,
Maria Fernanda Chacon Rey
,
Piyaporn Sodsriwiboon
,
Chia Yi Tan
, and
Bo Zhao
The departmental paper, "Rise of Digital Money: Implications for Pacific Island Countries," delves into the fast-evolving landscape of digital money in a diverse region of extremes in size, remoteness and dispersion, highlighting its significant macroeconomic and financial consequences. It provides an overview of the development of digital money and payment systems in Pacific Island Countries (PICs), assessing potential benefits and risks, with a focus on how they can harness digital technology to enhance financial inclusion and payment efficiency while minimizing risks. To this end, the paper also examines the prerequisites for successfully adopting various forms of digital money and proposes a strategic framework for policy decisions. The paper underscores the potential of digital money in advancing public policy goals, like financial inclusion and improved cross-border connectivity – given the specific characteristics of the region – while cautioning against the risks of rapid and inadequately regulated adoption. Accordingly, it advocates a gradual, well-informed approach, tailored to PICs' unique monetary and financial circumstances, including the presence of national currencies and the maturity of payment systems. Moreover, the paper suggests that a regional approach could help address capacity and scalability challenges in introducing new digital money forms and payment methods in PICs.
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.
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.