Regions and Countries

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p. 41 of 47 BACK | NEXT Developing Asia and the Pacific The global economy Newly industrialized economies Central Asian republics, Azerbaijan and Mongolia People’s Republic of China Southeast Asia South Asia The Pacific Cook Islands Fiji Islands Kiribati Marshall Islands Federated States of Micronesia Nauru Papua New Guinea Samoa Solomon Islands Tonga Tuvalu Vanuatu

Nauru

Economic performance

No evidence exists to suggest that real GDP grew in FY2000 (ending 30 June). Profits from phosphate mining fell because of the stronger US dollar, as the impact of changes in the exchange rate on the cost of inputs was greater than the impact on revenues. The only major construction project, the Ainabare boat harbor, was completed in 2000. However, revenue from fishing agreement license fees registered a 60 percent increase over FY1999. Prices of commodities rose to around 7.5 percent in FY2000 in response to the weakening Australian dollar (A$) and higher fuel prices.

Domestic policies: In FY2000, the budget deficit was over A$10 million or about 18 percent of GDP, almost four times greater than the budgeted deficit. The level of government external debt is estimated at A$280 million. External debt service was about 13 percent of exports of goods and services. Total money supply declined in FY2000. Confidence in the banking sector fell because of the weak liquidity position of the Bank of Nauru. In 2000, liquidity problems were chronic and withdrawals from personal accounts were rationed. Options to reform the banking sector are being considered, including revising the banking laws. Other major economic problems facing Nauru include the imminent depletion of the primary phosphate resource and persistent fiscal difficulties. In 1998, Nauru embarked on the Fiscal and Financial Reform Program, supported by an ADB loan. The Program encountered some hurdles, but the recently formed Nauru Committee for Development Planning is now overseeing it for more effective implementation.

ADB operations

Operational strategy: ADB’s operational strategy for Nauru is to reach an economic level sustainable by available resources and improve income-generating capability and social indicators. ADB will provide assistance to tighten regulatory laws and controls for offshore banking operations to minimize dubious banking activities. ADB’s medium-term assistance will help diversify the economy and develop the private sector through small business development. Being the only multilateral funding agency active in Nauru, ADB played a lead role in assisting the country in its efforts to recover from its financial difficulties. The major focus is to help the Government implement the Fiscal and Financial Reform Program and support privatization and employment-generating initiatives.

Policy dialogue: Policy dialogue with the Government focused on improving fiscal discipline across the financial sector and increasing transparency and accountability in public finance. ADB encouraged the Government to create a regulatory environment consistent with internationally accepted standards for operating offshore banks and companies registered in Nauru, essential to sustain reforms and attain self-reliance.

Loans and technical assistance: No loans were approved in 2000. ADB approved one advisory technical assistance grant for $300,000 to strengthen the Ministry of Finance and support the Bureau of Statistics Office.

Project implementation: Since joining ADB in 1991, Nauru has received one program loan that was still active at the end of 2000. No contract awards were made during the year; cumulative contract awards totaled $2.3 million. There were no disbursements during the year; total disbursements remained at $2.3 million. Progress was made in implementing the Fiscal and Financial Reform Program loan, the only ongoing loan in 2000. This resulted in considerably reducing government expenditure through a substantial downsizing of the civil service.

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