Vanuatu is a small developing state, consisting of 83 volcanic islands in the South Pacific. Tourism and agriculture are key drivers of economic activity, but distance from major markets and vulnerability to external shocks pose challenges to growth and development. Located on the earthquake-prone “ring of fire” and sitting at the center of the Pacific cyclone belt, Vanuatu experiences frequent natural disasters, including tropical cyclones, active volcanos and earthquakes, and is ranked as the most at-risk country in the world by the UN World Risk Index.
The economy has been growing strongly, boosted by spending on infrastructure and reconstruction projects following extensive damage caused by Cyclone Pam in 2015. The government has an ambitious development agenda aimed at developing urban and rural areas, improving living standards and delivering community services. As major infrastructure projects are completed, there is an increased focus on other drivers of medium-term growth, including initiatives to diversify and increase value added in agriculture and a cross-sector plan to develop air transport and tourism, the Shared Vision 2030.
The authorities largely agree with staff’s analysis and near-term outlook, and with the broad thrust of the advice. They thank staff for their thoughtful analysis and the open and collaborative approach taken by the team. Staff from the World Bank and Asian Development Bank were also invited to join relevant meetings, which allowed all involved to draw on each other’s expertise and make best use of the authorities’ time. The authorities value highly the advice and technical assistance received from the Fund and look forward to further constructive engagement in future.