Vanuatu: 2024 Article IV Consultation-Press Release and Staff Report

The 2024 Article IV Consultation highlights that as Vanuatu was recovering from the multiple natural disasters of 2023, the voluntary liquidation of Air Vanuatu in May 2024 created a major shock with significant effects on growth and business confidence. There is a strong need to address immediate risks to growth and stability, and then redouble efforts to rebuild buffers and tackle structural issues with policy reforms. Fiscal challenges abound and call for urgent and comprehensive action. In the near term, targeted and strategic support is needed to help stabilize the economy, while ensuring fiscal accounts remain under control. Monetary policy is appropriately accommodative but monetary financing needs to be reduced and eventually stopped. The currency basket needs close monitoring. Structural issues remain ever important, and action is needed such as reprioritization of investment needs and integration to the medium-term fiscal strategy, and an increase in efforts to address labor shortages and skills drain.