The International Monetary Fund (IMF) staff has concluded its 2025 Article IV mission to the Republic of Nauru. This visit is part of the regular consultations under Article IV of the IMF's Articles of Agreement, which are conducted to assess economic developments and offer policy advice.
The government of Nauru has worked over the past decade to restore economic stability, collaborating with development partners to enhance infrastructure and secure donor support. Despite these efforts, Nauru remains vulnerable to external shocks in a global environment marked by trade policy uncertainty and potential aid reductions. The IMF recommends that policies should focus on maintaining economic stability, rebuilding fiscal buffers, and pursuing structural reforms for long-term growth.
Economic growth in Nauru picked up in FY2025, driven by activity at the Regional Processing Center (RPC). Growth is expected at 2.1 percent in FY2025 but may moderate slightly in FY2026. Inflation rates remain elevated but are projected to decline steadily by FY2029.
Fiscal policies have been expansionary, reducing the fiscal balance due to increased spending financed by surplus from previous years. The medium-term outlook appears improved following a treaty with Australia and continued RPC operations.
Nauru’s financial system is transitioning from Bendigo Bank to Commonwealth Bank of Australia (CBA), with CBA beginning operations in August 2025. More than half of existing customers have applied for accounts at CBA despite some delays.
To build resilience, fiscal restraint is recommended due to regional uncertainties and persistent inflation. A cumulative adjustment equivalent to AU$10 million by FY2030 could balance buffer building with developmental needs.
In terms of financial sector policy, Nauru's banking transition requires proactive public outreach and coordination between government agencies and banks. Efforts should also address pressures on correspondent banking relationships while fostering financial literacy as a precursor for credit services introduction.
Structural reforms aimed at lifting potential growth include improving human capital through better education alignment with private-sector needs, enhancing infrastructure for trade promotion, strengthening governance strategies against corruption, and accelerating climate adaptation efforts such as solar farm commissioning.
Finally, improving macroeconomic data quality remains crucial for ongoing economic assessment and planning.
The IMF mission expressed appreciation for the cooperation from Nauruan authorities during their engagement and looks forward to continuing this collaboration through policy dialogue and capacity development support.