ADB Provides $2 Million Grant to Boost Tuvalu’s Fiscal Sustainability

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The FINANCIAL — The Asian Development Bank (ADB) has approved a $2 million grant to support a policy reform program that aims to strengthen the fiscal sustainability of Tuvalu, one of the world’s smallest and most vulnerable countries. 

“The program will contribute to Tuvalu’s long-term fiscal sustainability and better public service delivery by supporting government’s ongoing efforts towards sound fiscal management, improved public financial management practices, and strengthened performances by public enterprises,” said Robert Jauncey, ADB’s Regional Director for the Pacific Subregional Office, overseeing ADB’s operations in Tuvalu.

Tuvalu, a microstate in the Pacific, comprises nine low-lying atolls with a total land area of 26 square kilometers and a population of around 11,000. The country relies on unpredictable and volatile revenue sources, including fishing licensing fees, licensing fees for the use of the “dot.tv” internet domain name, and development assistance. Due to these limited resources achieving fiscal sustainability is a challenge for the government. 

The policy reform program helps address these challenges by promoting the adoption of public procurement policies and regulations to maximize government efficiency, boost transparency, create a level playing field for those seeking contracts with the government, and to promote public confidence in the procurement process. The program supports public enterprise reforms, which will allow eight public enterprises to operate on a commercial basis, reducing the need for government subsidies and encouraging greater private sector participation, according to ADB.

The program also supports changes in the existing accumulation and withdrawal rules of the Consolidated Investment Fund to ensure better use of the fund and its replenishment. The fund was established in 1987 to handle revenue surpluses that the government can draw upon to finance fiscal deficits. 

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“The implementation of these reform actions will give direction to the future of public sector management reforms in Tuvalu,” said Finance Minister Maatia Toafa. “Support from ADB and policy reform partners will help us to sustain fiscal stability, while putting the economy on a higher and more inclusive growth path.”

The program complements ADB’s policy-based lending operations in 2008 and 2012 amounting to $5.60 million, aimed at sustained growth and fiscal stability to guard against external shocks.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region.  In 2014, ADB assistance totaled $22.9 billion, including cofinancing of $9.2 billion.

 

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