Regions and Countries

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Vanuatu

Economic performance

The economy recovered in 2000 with an estimated growth of 2.8 percent, following negative growth of 3 percent in 1999. The tourism and construction industries led the recovery. Major ongoing construction projects include the Efate ring road, expanding the main airports on Efate and Santo, rehabilitating infrastructure damaged by Cyclone Dani, and developing the urban infrastructure. The agriculture sector continued to experience weakness. Inflation, moderate in recent years, was 2.7 percent in 2000. Despite a negative trade balance, a small surplus in the current account was expected in 2000. However, a sizable deficit is expected on the capital account of at least 4.0 percent of GDP in 2000.

Domestic policies: The budget deficit in 2000 reached about 8.0 percent of GDP because of the rollover of development projects from the 1999 budget. Controls on recurrent expenditure were tight during the year. Total taxation revenue for 2000 was slightly below the levels forecast in the budget, although value-added tax collections were in line with forecasts. External debt service was 1.3 percent of exports of goods and services. The major monetary initiative in 2000 was reintroducing foreign exchange guidelines. At the end of 2000, foreign exchange reserves were estimated to cover 5.4 months of imports. The Government’s long-term objective for the overall budget deficit is to ensure that borrowing is limited to development expenditures and on concessional terms. The quality and availability of infrastructure and government services fell dramatically outside the major towns of Port Vila and Luganville. To address this problem, an outer island infrastructure development program—an important component of the next phase of the Comprehensive Reform Program—was formulated.

ADB operations

Operational strategy: ADB’s operational strategy for Vanuatu is to continue supporting the Comprehensive Reform Program (which ADB has supported since 1997); promoting private sector-led growth; developing the productive sectors, particularly agriculture and fisheries; and providing infrastructure and social services. Crosscutting concerns include addressing good governance, poverty, employment, and other social issues.

The first phase of the Comprehensive Reform Program was completed by the end of 2000; Phase II will start in 2001.

Policy dialogue: Policy dialogue with the Government focused on identifying directions to ensure sustainability of both economic and public sector reforms. Good governance, services delivery, sound economic and financial management, poverty reduction, and an environment favorable to private sector investment were key issues. Continued support to the central agencies and the State Law Office was maintained to ensure progress in the Comprehensive Reform Program and the check-and-balance function of the legal sector in safeguarding good governance. Support was provided to strengthen the function of the national women’s council and to enhance frontline services in education and health.

Loans and technical assistance: No loans were approved in 2000. ADB approved three advisory and one project preparatory technical assistance grants totaling $1.4 million.

Project implementation: Since joining ADB in 1981, Vanuatu has received nine loans, of which three were active at the end of 2000. Contract awards totaled $9.5 million, bringing the cumulative figure to $46.4 million. The contract award ratio was 95.5 percent, higher than the ADB-wide average of 21 percent. Disbursements during the year totaled $10.6 million, bringing cumulative disbursements to $45.7 million. The disbursement ratio was 63 percent, higher than the ADB-wide average of 20.5 percent.

The three ongoing loans were classified as satisfactory in terms of achieving their development objectives. However, because of delays in recruiting consultants and slow contract awards, one loan was classified as partly satisfactory for implementation progress. One project underwent two changes in scope. Some delays were experienced with the submission of audited project accounts and financial statements. However, efforts continued on improving the status of compliance with other financial covenants, such as cost recovery and tariff structure adjustment under the Urban Infrastructure Project. Environmental and social covenants were met.

   

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