Six countries of the Pacific region have a high risk of debt crisis – World Bank

Six countries in the Pacific region are at high risk of a debt crisis, partly due to government spending on crisis management amid the COVID-19 pandemic. This is stated in a World Bank report published on Thursday, Reuters reports.

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The report states the need for fiscal consolidation in Kiribati, the Marshall Islands, the Federated States of Micronesia, Samoa, Tonga and Tuvalu, as these countries do not have domestic debt markets and access to international capital markets.

Among other countries in the region, Vanuatu has a medium risk level, while the debt of Palau and Nauru is stable, the report notes.

“Although the level of public debt as a share of GDP remains moderate in most countries in the region, economic geography and an unstable income base mean that the risks of a debt crisis remain high,” the report says.

Debt growth

Since 2019, debts in the region have grown sharply, as tourism-dependent economies have suffered from the closure of borders due to the pandemic, and trade has suffered from logistical problems.

Last month, the World Bank said that Fiji should also take urgent measures to reduce its debt burden.

Director of the World Bank for the affairs of Papua New Guinea and the Pacific region, Stephen Ndegwa, said that reducing debt, increasing revenues and improving the quality of public spending are critical areas for the countries of the Pacific region.

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The report notes that constant access to grants in accordance with pre-pandemic trends is also important for the search for capital investment projects to ensure sustainable development and resilience to climate change.

The report recommends that, along with more efficient spending of funds, the governments of the countries of the Pacific region should pay primary attention to improving tax collection in order to ensure a fair contribution of citizens and businesses to the economy of the region.

The document also states that the countries of the Pacific region should allocate more funds for measures of social assistance and protection.

Source: Ministry of Finance

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