The World Bank reported Thursday that COVID-19 spending had put six Pacific nations in danger of debt hardship.
Raising Pasifika recommended fiscal consolidation in Kiribati, the Republic of the Marshall Islands, Federated States of Micronesia, Samoa, Tonga, and Tuvalu because they lack local debt markets and foreign capital markets.
The research indicated that Palau and Nauru have sustainable debt, whereas Vanuatu has medium risk.
“While public debt levels as a share of GDP remain modest across most of the region, the PIC9’s economic geography and volatile revenue bases mean debt distress risks remain elevated,” it stated.
Since 2019, COVID border closures, logistical issues, and weather occurrences have impacted tourism-dependent businesses and increased debt. Last month, the World Bank advised Fiji to cut its debt immediately.
Stephen Ndegwa, World Bank Country Director for Papua New Guinea & the Pacific Islands, said Pacific governments must reduce debt, increase revenue, and improve government spending.
The research also recommended continuing access to funding aligned with pre-pandemic trends to locate capital investment projects for sustainable development and climate resilience.
To guarantee that individuals and businesses contribute their fair share to the region’s economies, the World Bank urges Pacific nations to increase tax collection and spending efficiency.
It also suggested Pacific nations increase social assistance and protection.
“These investments would help reduce poverty and inequality while also supporting communities in tough times, including after climate-related disasters or major economic shocks, such as the region saw from the COVID-19 pandemic and the recent natural disasters in Tonga and Vanuatu,” it said.