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Hidetaka Nishizawa, Mr. Scott Roger, and Huan Zhang
Pacific island countries (PICs) are vulnerable severe natural disasters, especially cyclones, inflicting large losses on their economies. In the aftermath of disasters, PIC governments face revenue losses and spending pressures to address post-disaster relief and recovery efforts. This paper estimates the effects of severe natural disasters on fiscal revenues and expenditure in PICs. These are combined with information on the frequency of large disasters to calculate the rate of budgetary savings needed to build appropriate fiscal buffers. Fiscal buffers provide self-insurance against natural disaster shocks and facilitate quick disbursement for recovery and relief efforts, and protection of spending on essential services and infrastructure. The estimates can provide a benchmark for policymakers, and should be adjusted to take into account other sources of financing, as well as budget risks from less severe as well as more frequent disasters.
Yongzheng Yang, Hong Chen, Shiu raj Singh, and Baljeet Singh

PICs are similarly conventional, but they should nevertheless reinforce PIC governments’ resolve for better governance. Improving competitiveness would be difficult without aggressively reducing the cost of distance and insularity, a principal source of PICs’ growth disadvantage. As in the manufacturing sector, transportation and communication industries also exhibit economies of scale, and this again puts small and remote countries in disadvantage. The challenge ahead is not only scaling up investment in transport and communication infrastructure, but also

Mr. Tobias Haque

approach to planning and sequencing these reforms in PICs, and one regional agencies and PIC governments have endorsed as good practice. Functions of a Public Financial Management Road Map PFM road maps are used to convert a PEFA assessment and other analytical inputs into a reform process. They outline a realistic list of specific, prioritized, and sequenced PFM activities to be undertaken over a given period. They identify expected improvements and assign responsibility for undertaking these reforms to specific teams or agencies within government. A good road map

Yongzheng Yang, Hong Chen, Shiu raj Singh, and Baljeet Singh
This study aims to test within a relatively homogeneous group of small states what differentiates the growth performance of Pacific island countries (PICs) from their peers. We find that PICs are disadvantaged by distance and hampered by lower investment and exports compared with other small island states, but greater political stability, catch-up effects from lower initial incomes, and slower population growth have helped offset some of these disadvantages. On balance, policy-related factors, together with geography-related disadvantages, have led to growth rates in PICs that are much lower than in other small states. We also examine how real exchange rate appreciation, unfavorable developments in the external trade environment, and rising international transport costs may have contributed to PICs’ slower growth over the past decade.
Yongzheng Yang

significant in some areas, as shown by marked declines in the cost of telecommunication following the industry’s deregulation. However, as the quest for faster and more inclusive growth continues, PIC governments will need to keep searching for such high-payoff reforms. The ever changing global environment should only strengthen the resolve of PIC governments to accelerate such reforms. Annex 4.1. Country List and Data Description Annex Table 4.1.1 Country List Africa (14) Americas (12) Europe (4) Pacific (9) Asia (6) Botswana

Yongzheng Yang, Hong Chen, Shiu raj Singh, and Baljeet Singh
Hidetaka Nishizawa, Mr. Scott Roger, and Huan Zhang

type and severity of natural disasters. This is a very wide range and makes it difficult for policy makers to gauge how much assistance they should count on in the wake of a severe disaster. Moreover, the bulk of such assistance may go directly to the private sector, so that only a small part may be available for budget support. In such circumstances, PIC governments should probably make quite conservative assumptions regarding post-disaster external budget support. B. Domestic Financing Given relatively small financial markets in PICs, the scope for

Vybhavi Balasundharam and Mr. Robin Koepke

greener recovery ( IMF 2021 ). Policymakers should also leverage the accelerating digitilization in tourism services, including a higher use of automation, contact-less payments and services, and real-time information provision, to diversify their tourism base. Moreover, policymakers could help facilitate a reallocation from cruise travel to non-cruise tourism, given that cruise tourism will likely take more time to recover. Many of these structural reforms would require considerable public investment. Given the resource constraints in PICs, governments could actively

Vybhavi Balasundharam and Mr. Robin Koepke
The COVID-19 pandemic prompted a collapse in international tourism, severely impacting the tourism-dependent economies in the Asia & Pacific region. Once countries start reopening, tourism diversion effects could accelerate the recovery in countries that establish themselves as more attractive travel destinations than competitors. We investigate the impact of previous shocks in tourism competitor countries on visitor inflows, with a particular focus on tourism-dependent Pacific Island Countries (PICs). We find that PICs were generally resilient to external shocks and benefitted from diversion effects for certain types of shocks. For example, the share of departures from Australia to PICs increased by 12 percent during the SARS outbreak. We then derive policy implications for the post-COVID-19 revival of inbound tourism to PICs and lessons for the future.
Mr. Richard I Allen, Ms. Majdeline El Rayess, Laura Doherty, and Priya Goel
This paper reviews the Public Financial Management (PFM) reform stategy for 16 Pacific Island Countries (PICs) during the period 2010-2020. The strategy was endorsed by the finance and economic ministers of the region (FEMM) in 2010. The paper analyzes more than 30 PEFA assessments carried out across the region. The region shares the generally slow pace of PFM reform that is also a feature of most developing countries. Some PICs have improved their PFM performance significantly, while others have done less well. PFM reforms have suffered from the small size and low capacity of many PICs, poorly designed PFM roadmaps, variable political suppport for reform, and vulnerability to natural disasters. The paper recommends that in the next five years, there should be a more granular and targeted approch to PEFAs. PICs should focus on basic PFM reforms and (where capacities allow) more transparent public finances, as well as better management of climate change considerations, public infrastructure, gender inequalities, and state-owned enterprises. Perseverance by countries in implementing reforms and leadership by finance ministries are critical. PFTAC’s advice is highly regarded across the region, and it could consider alternative modalities of CD delivery and stronger coordination with other development partners.