The International Monetary Fund (IMF) has concluded its 2025 Article IV Consultation with Vanuatu. Led by Mr. Mike Li, the IMF team held discussions with Vanuatu authorities and stakeholders from July 10 to July 23, 2025.
Mr. Li stated that "Vanuatu’s growth is expected to gradually recover to 1.6 percent in 2025 and 2.6 percent in 2026 after experiencing a notable slowdown last year." The country's economy faced challenges due to a major earthquake in December 2024, the liquidation of Air Vanuatu in May 2024, and three cyclones in 2023.
Headline inflation has returned to the Reserve Bank of Vanuatu's target band but is projected to edge higher within the band. The fiscal deficit is expected to widen due to weaker revenues and increased expenditures related to post-earthquake rebuilding and household support.
"However, uncertainty around the outlook remains high," Mr. Li noted, highlighting risks such as domestic connectivity issues, potential revenue slumps from the Economic Citizenship Program (ECP), reconstruction delays, and global trade tensions.
To safeguard debt sustainability post-earthquake fiscal support should be well-targeted with a medium-term consolidation strategy. "Spending should be prioritized...with a focus on rebuilding critical infrastructure," said Mr. Li.
Monetary policy remains broadly appropriate according to Mr. Li, with ongoing legislative reforms aimed at reinforcing central bank independence.
The financial sector requires stronger safeguards against vulnerabilities including high non-performing loans (NPLs). Strengthening financial integrity and governance are crucial steps outlined by Mr. Li.
Addressing structural challenges like labor shortages and climate risks are essential for inclusive growth through investments in education and vocational training.
Mr. Li expressed gratitude for the engaging discussions with Vanuatu authorities during their visit.