The Executive Board of the International Monetary Fund (IMF) has completed its 2025 Article IV Consultation with the Republic of Nauru, according to a statement released on September 22, 2025. The consultation process included discussions between IMF staff and Nauruan officials about recent economic developments and policy priorities.
Nauru’s government has taken steps to restore economic stability in collaboration with development partners. These efforts have focused on improving infrastructure, expanding access to banking services, and securing ongoing donor support. However, the country remains exposed to external risks such as global policy uncertainty and possible reductions in development aid.
Economic growth in Nauru reached 2.1 percent for fiscal year 2025, largely due to continued donor funding and renewed activity at the regional processing center. Inflation stayed above 6 percent but is expected to decline to 4.5 percent this fiscal year. The medium-term fiscal outlook has improved following the signing of the Nauru-Australia Treaty in late 2024 and expectations for increased processing center activity.
Despite these gains, downside risks persist for Nauru’s economy. A reduction in foreign grants could negatively impact growth, while inflationary pressures may continue if commodity prices remain volatile or food shipments are delayed by global trade tensions. Additionally, disruptions during the transition to a new commercial bank could affect payment systems and overall economic activity.
Following its review, the IMF Executive Board issued an assessment commending Nauru’s progress:
"Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities’ efforts to restore macroeconomic stability over the last decade despite the significant structural challenges faced by Nauru owing to its remote location and small size. Directors welcomed the improved outlook supported by the anticipated pickup of the regional processing center, while noting that risks are tilted to the downside, including from a potential decline in donor support. Against this background, they underscored the importance of fiscal and structural reforms, supported by capacity development and strong donor partnership, to promote economic diversification and sustainable growth."
The Board highlighted Nauru’s commitment to prudent fiscal management:
"Directors welcomed the authorities’ commitment to fiscal prudence and noted the importance of continued compliance with the fiscal responsibility ratios and sustained contributions to the Intergenerational Trust Fund. They concurred that fiscal policies should pivot towards restraint in the near term to build buffers and bolster resilience. Directors emphasized the need to avoid procyclical spending and noted that containing the rise in the government wage bill, while strengthening social safety nets, rationalizing expenditures, and mobilizing revenues, would help contain inflationary pressures and support sustainable growth. Improvements in public financial management, including in SOEs, will be crucial for managing fiscal risks."
On financial sector issues:
"Directors welcomed the progress in transitioning to a new commercial bank and stressed the importance of stronger coordination, oversight and contingency planning by government agencies to ensure uninterrupted banking services and safeguard financial stability. They agreed that banking sector stability could pave the way for enhanced access to credit; however, cultivating financial literacy is essential for promoting responsible borrowing. Directors also recognized the progress made in enhancing the AML/CFT regulatory framework, while calling for continued vigilance in managing correspondent banking relationships and monitoring emerging risks related to digital assets and the citizenship program."
Regarding broader reforms:
"Directors concurred that structural policies should be geared towards lifting potential growth and diversifying growth. They emphasized that enhancing human capital and infrastructure, strengthening governance, transparency and the business environment, advancing digitalization, and building resilience against natural disasters are imperative for achieving sustainable growth. Carefully assessing the risks and opportunities from deep sea mining would also be important. Enhancing data quality will also be critical to improve policy making."
Nauru uses Australia’s currency as legal tender; its nominal GDP was AU$247.6 million (about US$13,592 per capita) for FY2024 with a population just under 12 thousand people.
Under Article IV of its Articles of Agreement (http://www.IMF.org/external/np/sec/misc/qualifiers.htm), IMF teams conduct regular consultations with member countries—collecting information on their economies before presenting findings for discussion by its Executive Board.