Vanuatu - Joint World Bank-IMF Debt Sustainability Analysis
The updated DSA suggests that the external risk of debt distress for Vanuatu remains moderate with limited space to absorb shocks. All external debt indicators remain below the relevant indicative thresholds under the baseline scenario, incorporati...
| Main Authors: | , |
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| Format: | Report |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/633011570640430738/Vanuatu-Joint-World-Bank-IMF-Debt-Sustainability-Analysis-June-2019 http://hdl.handle.net/10986/32563 |
| Summary: | The updated DSA suggests that the
external risk of debt distress for Vanuatu remains moderate
with limited space to absorb shocks. All external debt
indicators remain below the relevant indicative thresholds
under the baseline scenario, incorporating the average
long-term effects of natural disasters on growth and the
fiscal and current account balances. A tailored natural
disaster shock, reflecting Vanuatu’s vulnerability to
disasters, would cause the present value (PV) of public and
publicly guaranteed (PPG) external debt-to-GDP ratio to
breach the threshold from 2024 onwards. The overall risk of
debt distress is assessed as moderate. Although the PV of
the public-debt-to-GDP ratio remains below the 55 percent
benchmark under the baseline scenario, the
public-debt-to-GDP ratio would breach the authorities'
debt ceiling of 60 percent by 2025. Moreover, a tailored
natural disaster shock would lead to a significant
deterioration in debt sustainability, breaching the
benchmark. The breach of the authorities’ debt ceiling and
of the benchmark indicates the need for rebuilding fiscal
buffers and enhancing resilience against shocks, including
from natural disasters. This requires both stronger revenue
mobilization measures, including an introduction of the
proposed income taxes, and expenditure rationalization in
the medium term. When contracting new public infrastructure
projects, the authorities are encouraged to seek grants or
concessional loans as much as possible to contain its debt burden. |
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