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Annual Report 2001

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Tuvalu

Economic performance

Tuvalu’s economy continued to grow in 2001, expanding at approximately 4.0%, compared with 3.0% in 2000. Growth was led by the public sector, and the mining and quarrying sector as a result of government and aid-funded projects. Annual average inflation fell from 5.3% in 2000 to 1.8% in 2001 primarily because of a drop in the prices of textiles, clothing, and other miscellaneous items. Cash incomes have risen strongly with seafarer remittances alone having more than doubled over the last 4 years, reaching an estimated $2.6 million for 2001. However, significant wealth disparities exist between the main atoll Funafuti and the outer islands. Tuvalu relies heavily on income from fishing license access fees (estimated at A$6.1 million in 2001), rent from its international telecommunication dial-up code (estimated at A$0.31 million in 2001), and, more recently, its top-level Internet domain license fees “.tv” (estimated at A$1.6 million in 2001). Remittances from seafarers, official transfers, and investment income from the Tuvalu Trust Fund (TTF) assets also contribute substantially to foreign exchange earnings. A positive effect of the Australian dollar depreciation is that the US$-denominated revenue from fishing licenses and domain fees are increasing. Over the past 5 years, revenue from the TTF has contributed an average of 19.0% per annum to the Government’s total recurrent revenues but this revenue was smaller in 2001 due to weakness in overseas financial markets. The actual budget outcome for 2001 was an overall budget surplus of A$2.5 million or 20.0% of GDP.

ADB operations

Operational strategy: ADB’s operational strategy for Tuvalu is to promote economic growth and poverty reduction by supporting the development of the outer islands, where the poor and the vulnerable groups are concentrated. The main principles of ADB’s strategy call for encouraging public sector reform, including corporatizing government businesses; devolving responsibility for island development to local governments; reorienting the economy toward private sector-led growth; improving economic infrastructure; and developing human resources.

Policy dialogue: Ongoing dialogue with the Government focuses on outer island decision making and corporatizing government agencies. Also, discussions on the need to maintain the standards of Tuvalu’s only higher educational institution, the Tuvalu Maritime Training Institute, are under way.

Loans and technical assistance: No loans were approved in 2001. One technical assistance grant amounting to $300,000 was approved for a country economic study and strategy development.

Project implementation: Since joining ADB in 1993, Tuvalu has received one loan. Contract awards totaled $1.2 million, bringing the cumulative total to $4.0 million. The contract award ratio was 100%. Disbursement during the year totaled $1.2 million, bringing cumulative disbursements to $4.0 million. The disbursement ratio was 95.8%, higher than the ADB-wide average of 20.5%.

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