The Ministry of Finance and Economic Management (MFEM) has developed a strategy to manage the debt over the next four years.
The strategy covering 2019 to 2022 follows the first one which was implemented from 2015 to 2018.
This second strategy provides updated figures of the current levels of debt and projections of the debt levels dependent on different situations for the next 20 years.
The strategy was approved by the Council of Ministers (COM) on the 18 September and was signed by the Minister for Finance and Economic Management, Gaetan Pikioune (MP) recently.
“The Government confirms its utmost commitment to prudent debt management in line with the PFEM Act. In addition, it shows the Government’s commitment to creating an evidenced-based and feasible strategy to ensure that public debt levels remain sustainable, while supporting development programs across Vanuatu to invest in our country’s future,” the minister said.
The strategy focuses on managing the State debt at prudent and sustainable levels, while taking into account the fact the Government will have to start making repayments on the most recent loans from the year 2021.
New loans funded by external creditors should have a 35 per cent grant component, a 10-year grace period (when no repayments are made) and an economic return sufficient to cover at least the interest and repayment costs.
This strategy specifies that the value of State debt divided by Gross Domestic Product (GDP – a measure of total production in the entire country or economy) should be below 60 per cent, and the value of debt owed to external creditors divided by GDP should be below 40 per cent. This should be achieved by redefining the terms of new borrowing and carefully managing the economy. The Government hopes to continue making repayments on the debt in advance of the due date (debt prepayments) when fiscal conditions allow.
Photo supplied Caption: Minister of Finance and Economic Management Gaetan Pikioune