Regions and Countries

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p. 2 of 18 BACK | NEXT I. Country Performance Assessment A. Economic Performance Assessment B. Poverty Assessment C. Governance: Sound Development Management D. Implementation Assessment II. Country Operational Strategy III. Sector Strategies IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Tuvalu : I. Country Performance Assessment

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A. Economic Performance Assessment

Tuvalu’s development constraints are severe. It has a total land of 26 square kilometers covering nine coral atolls and reef islands spread across more than 900,000 square kilometers of Pacific ocean. Land resources are of poor quality and vulnerable to cyclones. In 1986, the United Nations granted Tuvalu Least Developed Country Status in recognition of its unique difficulties.

Despite these limitations, Tuvalu achieved an average real GDP growth rate of 5.2 percent during 1988-1998, one of the best performances among Pacific island economies. GDP in 1998 was estimated to be about Australian $21 million, or U$1,300 per capita (detailed country performance indicators are shown in Appendix 1). The main sources of growth have been in construction and government services. Construction has been financed by both external aid funds and remittances from overseas workers. Inflation has remained low at an average rate of 1.8 percent during 1993-1998, reflecting the favorable prices of goods imported mainly from Fiji, Australia, and New Zealand. Imports grow in line with GDP, while in contrast the export base is very narrow and declining. The merchandise trade balance in 1998 was estimated to be in deficit of around 60 percent of GDP. The trade deficit has been offset by aid funds, unrequited transfers, investment income, and seafarer income. The Government acknowledges the remittances from overseas Tuvaluans as a main contributor to the national economy, and encourages youth to work overseas.¹

Fiscal prudence has been the hallmark of Government policy with firm commitment to achieving balanced budgets. In 1998, the recurrent budget recorded a surplus of A$4.2 million, primarily because of the strong performance of fisheries licenses revenue. This policy has been partly facilitated by drawdowns to the recurrent budget from the earnings of the Tuvalu Trust Fund (TTF). The amount withdrawn in 1998 was A$3.8 million. TTF’s total value stands, at the end of March 1999, at A$71.1 million. The TTF Advisory Committee composed of donor and Tuvalu Government representatives regularly meets to discuss macroeconomic issues and the Government budget.

The introduction in the 1998 budget of Special Development Expenditures (SDE) funded by Government savings means that Tuvalu is no longer wholly dependent on external donors to finance its development budget. SDE were A$3.7 million in 1998 and A$9.3 million in 1999, mainly for school buildings and community fishing centers in the outer islands. SDE are estimated at A$10.1 million in the 2000 budget.

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