The Asian Development Bank (ADB) will provide an US$80 million loan and the Government of New Zealand a US$21 million grant to help the Cook Islands’ economy transition from recovery to sustainable, private sector-led growth.
Through the Supporting Sustainable Recovery Programme, the funding will help the Government of the Cook Islands progress ongoing reforms to improve public financial management and foster private sector activity.
The programme also provides a precautionary financing option that will allow the government to access critical funds for public sector operations, services to vulnerable households, and private sector recovery if economic and fiscal conditions deteriorate.
“The Cook Islands’ nascent economic recovery could unwind if further impacts from the pandemic delay the revival of its tourism industry,” said ADB Public Sector Economist and program team leader James Webb.
“Reforms supported under this programme will address both immediate recovery needs as well as longer-term development constraints by improving budget and revenue management and encouraging the private sector to grow and diversify. The precautionary financing option also allows the government to guard against a slower than expected recovery, and better manage its use of debt financing.”
As part of the programme, new fiscal, cash management, and tax compliance strategies, along with a new audit reporting legislation, will help improve fiscal stability and management.
To drive private sector growth, the government has established a multi-agency task force to facilitate quarantine-free travel; introduced more flexible processes for migrant workers to undertake new or secondary jobs; prepared a new, rules-based immigration bill that eliminates discretionary decision-making; established an online business registry and a competition regulator; and removed monopoly protection in the telecommunication sector.
These reforms will help better manage the country’s fiscal and cash position, improve tax compliance, reopen the economy, ease labour shortages, improve business registration, and promote competition.
The programme builds on the US$21.49 million COVID-19 response funding and assistance ADB has provided to the Cook Islands in 2020, as well as a range of technical assistance provided to the Ministry of Finance and Economic Management.