This Selected Issues paper analyzes fiscal management and strategy for growth for Vanuatu. It presents an overview of recent fiscal policy and outcomes. The main structural changes in the financial sector since independence in 1980 are discussed. The paper highlights some key features common to most Pacific Island countries’ financial systems. It concludes that despite the recovery from the 1998 financial crisis, the financial system needs further reforms to promote private sector-led development in the medium term.
) is limited to 20 percent of the average annual ordinary government revenue for the three financial years immediately preceding the year in which financing is granted. However, the Minister of Finance and Economic Management can issue a directive to the RBV to temporarily increase the statutory limit to 30 percent; the 20 percent limit, however, has never been breached. Prior to 2003 the RBVoverdraftlimit ranged from Vt170-Vt500 million and has been limited at Vt400 million thereafter. The government has continuously resorted to the RBV overdraft and rolled over