Rising Fiscal Challenges In The Pacific In 2014 ADB
WELLINGTON, NEW ZEALAND (2 December 2013) – Fiscal pressures are expected to increase in the Pacific in 2014, according to the latest issue of the Asian
Development Bank’s (ADB) Pacific Economic Monitor, launched today at the offices of the New Zealand Aid Programme.
Public spending for post-cyclone recovery in Samoa is likely to slow progress towards fiscal consolidation and drive up
debt levels. In Fiji, rising capital expenditures by the government and anticipated election-related spending may
challenge efforts to keep fiscal deficit in check.
Timor-Leste’s fiscal surplus is expected to diminish significantly due to declining petroleum revenues and continued
high levels of government expenditure. Deficit-financed fiscal stimulus is expected to continue in Papua New Guinea
(PNG) in an effort to counter the effects of a slowdown in economic growth. However, ongoing problems with the quality
of expenditure and timely implementation of projects due to capacity constraints will likely to persist.
In the north Pacific, the Federated States of Micronesia and Republic of Marshall Islands continue to struggle in their
efforts to accumulate trust funds that will enable them to maintain government expenditure beyond 2023, when annual
transfers from the United States under the Compacts of Free Association are set to expire.
“While there is some impetus to spend for growth in the region, it remains important to proceed with public financial
management and structural reforms to build economic resilience” said Xianbin Yao, Director General of the ADB’s Pacific
Department. “The looming impacts of climate change make resilience even more crucial, with added focus on adaptation and
disaster risk management.”
Revenue collections have declined in the region’s large resource exporters, but remained strong in the smaller Pacific
economies in 2013. Lower commodity prices are weakening revenue collections in PNG. In Timor-Leste, offshore petroleum
production appears to have peaked. Falling log exports have decreased revenues from timber export duties in the Solomon
Islands. Revenue declines, along with limits in government capacity to implement capital projects, have contributed to
delays in budget execution and slowed growth in these economies.
In contrast, revenues are exceeding budget targets for the second consecutive year in Kiribati, the Republic of the
Marshall Islands, Nauru, and Tuvalu, mostly due to increased fishing license fees. Tax collections in the Cook Islands,
Fiji, and Vanuatu are also higher than expected due to higher tourism arrivals and other factors.
The policy briefs in this issue focus on the economics and financing of climate change in the Pacific. The first brief
summarizes estimates and findings from The Economics of Climate Change in the Pacific. The next brief examines impacts of climate change on agriculture in the Pacific in greater detail. Both briefs weigh
policy options for facilitating climate change adaptation and mitigation in the region.
An external contribution from the World Bank profiles the Pacific Catastrophe Risk Assessment and Financing Initiative. The fourth brief discusses ways to increase public resources available for climate change adaptation and mitigation
through mainstreaming in public financial management systems.
The Pacific Economic Monitor is a tri-annual review of economic developments in ADB’s 14 developing member countries in the Pacific. Each issue
includes policy briefs on a subject of current importance to the region. Contributions from outside authors and
institutions are encouraged.
ENDS
Read ADB report: (Pacific Economic Monitor)