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Annual Report 2001

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Nauru

Economic performance

It was not possible to obtain official estimates of the latest macroeconomic indicators covering 2001. Information on Nauru’s national account table for 2001 is not available. Nauru’s dominant major income source, phosphate production, continues to decline in volume and prices. The Nauru Phosphate Royalties Trust (NPRT), once the holder of overseas reserves valued at over A$1 billion, had an estimated net worth of only about A$150 million. The Government faced serious cash constraints in 2001 and the draft 2002 budget indicated a deficit of A$40 million–50 million. Nauru also faced the need to further reform its offshore banking sector. An unforeseen development toward the end of 2001 was the agreement between the governments of Nauru and Australia that Nauru would host over 1,000 asylum seekers transferred from Australian waters, and Australia would provide mainly in-kind budget support. This is expected to give a temporary boost to the Nauru economy.

ADB operations

Operational strategy: ADB has played a lead role in helping the country recover from its financial difficulties through a program loan in 1999. ADB will coordinate closely with other funding agencies, especially the Australian Agency for International Development, and provide complementary assistance as necessary.

Policy dialogue: In 2001, policy dialogue was conducted on measures to restore macroeconomic stability and fiscal discipline, and to protect the country’s dwindling economic assets. Although ADB provided advice on these issues, limited progress has been achieved in key reform areas.

Loans and technical assistance: In 2001, no loans or technical assistance were approved. Technical assistance implementation in 2001 included fielding consultants, which has continued intermittently since 1999. Assistance was also provided for appraising the condition and prospects of the Bank of Nauru and giving options for restoring banking services; providing advice and training in budget design and preparation; and evaluating NPRT’s net assets and assistance in planning and implementing its transition from a predominantly property- to financial assets-based portfolio.

Project implementation: Since joining ADB in 1991, Nauru has received one program loan that was still active at the end of 2001. 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.

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