On January 22, 2020, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Nauru.
Nauru is at a point of transition with a decline in phosphate mining and the activity associated with the Regional Processing Centre (RPC) for asylum seekers. New sources of economic growth and income are needed to support Nauru’s development agenda. Growth picked up to 5.7 percent in FY2018 boosted by RPC related activity, fisheries, and preparations for the Pacific Island Forum. However, growth slowed in FY2019. Despite improved economic performance in recent years, Nauru continues to face challenges in sustaining growth and ensuring fiscal sustainability due to its limited sources of growth and income. The country is also vulnerable to climate change, its antiquated infrastructure hampers trade and growth, and its health indicators are below those of peers due to high incidence of non-communicable diseases. The medium-term outlook depends on the level of RPC activity in the future, fishing revenues, and completion of infrastructure projects. A scaling down of phosphate mining and activities associated with the RPC will reduce budget revenues. With limited access to borrowing, fiscal spending would have to adjust accordingly. Inflation is projected to remain low, in line with the slowdown in the economy, inflation in Australia, and low commodity prices.
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.