Front Matter Page
IMF Country Report No. 14/110
REPUBLIC OF PALAU
2014 ARTICLE IV CONSULTATION—STAFF REPORT; PRESS RELEASE; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR THE REPUBLIC OF PALAU
May 2014
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2014 Article IV consultation with the Republic of Palau, the following documents have been released and are included in this package:
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on April 23, 2014, following discussions that ended on February 27, 2014, with the officials of Palau on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on April 7, 2014.
An Informational Annex prepared by the IMF.
A Press Release summarizing the views of the Executive Board as expressed during its April 23, 2014 consideration of the staff report that concluded the Article IV consultation with Palau.
A Statement by the Executive Director for the Republic of Palau.
The following document has been or will be separately released
Selected Issues Paper
The publication policy for staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
PO Box 92780 • Washington, D.C. 20090
Telephone: (202) 623-7430 • Fax: (202) 623-7201
E-mail: publications@imf.org Web: http://www.imf.org
Price: $18.00 per printed copy
International Monetary Fund
Washington, D.C.
©2014 International Monetary Fund
Front Matter Page
REPUBLIC OF PALAU
STAFF REPORT FOR THE 2014 ARTICLE IV CONSULTATION
April 7, 2014
Key Issues
Context. After two years of strong performance, growth slowed down in FY2013 due to declines in construction and tourism, while inflation moderated thanks to stable international food and fuel prices. The outlook points to a modest recovery, but Palau’s heavy reliance on tourism, grants, and food and fuel imports carries downside risks. Without substantial fiscal consolidation over the medium term, Palau’s fiscal position will be unsustainable when the Compact grants expire in 2024. Discussions focused on:
Managing fiscal adjustments to ensure fiscal and debt sustainability.
In the near term, replenish the fiscal buffers that were allocated for typhoon-related expenses by containing current spending and saving any additional revenue gains that are expected from recent revenue efforts.
Strengthen fiscal consolidation over the medium term through comprehensive tax reform and expenditure reform to achieve fiscal self sufficiency when the Compact grants expire.
Improve public finance management to strengthen the budget framework and ensure debt sustainability. Continue reforming public entities to contain fiscal risks and reduce government subsidies.
Promoting private sector development and financial stability to sustain growth.
Intensify efforts to diversify the economy, improve the investment climate, and address infrastructure bottlenecks in order to enhance economic resilience and growth potential.
Preserve financial stability by strengthening and broadening financial regulation and supervision.
Approved By
Stephan Danninger and Masato Miyasaki
Discussions took place during February 12–27, 2014. The mission team comprised Mr. Feridhanusetyawan (head, APD), Mr. Dall’Orto (SEC), Ms. Hussiada (APD), Ms. Pan (World Bank), and Mr. Usui and Ms. Koshiba (Asian Development Bank). Mr. Yoon and Mr. Remengesau III (OED) also participated. The team met with President Remengesau Jr.; Minister of Finance Sadang; Minister of Natural Resource, Environment, and Tourism Sengebau; Minister of Health Ngirmang; congress members; other senior officials; and representatives of the private sector and donor community. The mission made a presentation on regional outlook and Palau’s prospects and policy priorities in the Palau National Congress. The mission’s Concluding Statement is published.
Contents
OUTLOOK AND RISK
ENSURING FISCAL AND DEBT SUSTAINABILITY
RAISING GROWTH POTENTIAL
STAFF APPRAISAL
BOX
1. Palau: Promoting Tourism and Growth
FIGURES
1. Real Sector Developments and Outlook
2. External Sector Developments and Outlook
3. Fiscal Sector Developments and Outlook
4. Comparison with Other Pacific Island Countries
TABLES
1. Selected Economic Indicators, 2008/09–2014/15
2. Medium-term Projections, 2010/11–2018/19
3. Balance of Payments, 2008/09–2017/18
4. Statement of Government Operations, 2008/09–2014/15
ANNEXES
I. Risk Assessment Matrix
II. Long-Term Fiscal Sustainability Analysis
III. Public Sector Debt Sustainability Analysis
Front Matter Page
REPUBLIC OF PALAU
STAFF REPORT FOR THE 2014 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
April 7, 2014
Prepared By
Asia and Pacific Department
(In consultation with other Departments)
Contents
FUND RELATIONS
IMF–WORLD BANK COLLABORATION
RELATIONS WITH THE ASIAN DEVELOPMENT BANK
RELATIONS WITH THE PACIFIC FINANCIAL TECHNICAL ASSISTANCE CENTRE (PFTAC)
STATISTICAL ISSUES
Front Matter Page
Press Release No. 14/200
FOR IMMEDIATE RELEASE
May 6, 2014
International Monetary Fund
700 19th Street, NW
Washington, D. C. 20431 USA
Telephone 202-623-7100
Fax 202-623-6772
