Pacific Island countries face mounting economic pressure from global trade disruptions, debt risks, and shrinking remittances, the International Monetary Fund(IMF)has warned.
In an interview with PACNEWS, Nada Choueiri, Deputy Director of the IMF’s Asia & Pacific Department, said slowing growth in key partner countries due to trade tensions is already impacting Pacific economies—and the effects are likely to deepen.
“Remittance flows would also be expected to shrink, as the trade tensions lower growth in neighbouring countries. But we won’t be able to measure the impacts for some time, because of the time it takes to compile and publish the data,” Choueiri said.
She highlighted debt sustainability as a persistent concern across the region.
“Even before the current trade tensions, it was a major issue for Pacific Islands – indeed, our formal assessments that we include in our country reports showed that half of our Pacific Island members are at high risk of debt distress,” she said.
“In addition, many governments in the region are highly dependent on grant revenues. This is why we have been providing policy advice to mobilise revenues and improve the efficiency and targeting of government spending,” she told PACNEWS.
The IMF is also helping governments manage external vulnerabilities, such as commodity price volatility, climate change, and global instability.
“We support our members through providing analysis and policy advice, through capacity development, and, in some cases, through financial support,” said Choueiri.
She noted the Pacific’s exposure to climate shocks and praised recent use of new financing tools like the Resilience and Sustainability Facility (RSF), which Papua New Guinea accessed in December 2024.
“Our capacity development efforts cover technical assistance on fiscal, monetary, and financial policy implementation, macroeconomic statistics and analysis, and now public financial management specifically on climate adaptation where climate shocks significantly impact the macroeconomy,” she said.
Looking ahead, Choueiri warned that global trade system shifts could pose both risks and opportunities.
“The big risk for small countries is that they get caught in the crosscurrents as large countries face off against each other,” she said.
“But there is potential for an upside: a settlement among the largest players that preserves openness and delivers a more-level playing field could deliver a more stable environment for Pacific Island economies,” said Choueiri.
