Vanuatu Lifts Itself Out Of Economic Swamp

by Mary Swire, Tax-News.com, Hong Kong

27 May 2005

Vanuatu announced increased growth of 3.5% in 2004 based on strong tourism and better agricultural exports.

After the recession of 2001-2, the economy is growing faster than it has since the mid-1990s according to 2004 statistics released by the government. Growth in 2004 was up from 2.4% in 2003. The number of tourists in 2004 was up 20% in 2004, due partly to better airline services; Australia in particular provided substantial increases in tourist traffic.

In the agricultural sector, the all-important copra sector saw output reaching over 40,000 tons, with a major shift toward coconut oil processing.

The banking sector however continues to shrink as the government pursues tighter regulatory policies under pressure from international bodies. Once sporting more than 100 banks, Vanuatu now has four domestic banks and a mere six international ones. 28 banks have departed or been closed down in the last 2 years alone.

As a sort of reward for its efforts to clean up the financial sector, Vanuatu is now receiving significant international support. Recently the European Union approved the direct payment into the Government’s central account of VT92 million. This grant payment is in support of Vanuatu’s efforts towards macro-economic stability and proper public finance management. Another release of the same amount is foreseen in the last quarter of the current year subject to the fulfillment of certain conditions. These concern the evaluation of key indicators in the field of public finance management as well as in the social sectors. The Head of the EC Office in Port Vila congratulated the Government for the country’s
sustained efforts to achieve macro-economic stability and to enhance public finance management. He also assured the Government of the European Commission’s willingness to continue its support for the on-going reform of the country’s economy and public service.

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