IMF on Tuvalu growth

THE executive board of the International Monetary Fund (IMF) concluded the Article IV consultation with Tuvalu.

In a statement, it says growth is picking up modestly on a generally stable outlook, and inflation has been moderate.

“Activity has benefited from increased competition in the retail sector and a recent boom in the fisheries sector as well as development partners’ support, while banking weaknesses has constrained financial support for the private sector, and the poorly managed public enterprises have strained government finances and hampered the country’s business climate.”

The bank said balance of payments had been supported by large fishing-related receipts and official aid.

“Fishing exports and receipts of fishing licence fees have more than doubled in the past few years, and official aid by development partners has also risen sharply.

“Remittances, however, have shrunk markedly since the global financial crisis largely as a result of limited human capacity and weak competitiveness.”

Meanwhile, it said imports had been generally stable on account of restrained budget spending until recently.

As a result, it adds foreign exchange reserves have risen to eight months of imports.

“The fiscal policy achieved a substantial surplus in 2013.

“In addition to record high fishing licence fees, tax revenues also outperformed the budget mainly because of improved compliance by public enterprises.

“The favourable revenue has been reinforced by higher-than-expected foreign grants.

“As a result, fiscal buffers have been built up to comfortable levels.”

However, it added a large budget expansion in 2014 has increased risks to fiscal sustainability.

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