Republic of Marshall Islands: Selected Issues

International Monetary Fund

No 2025/322, IMF Staff Country Reports from International Monetary Fund

Abstract: This Selected Issues paper focuses on building resilience to natural disasters and climate change in the Marshall Islands. The Republic of Marshall Islands (RMI) faces severe economic threats from climate change and natural disasters, resulting in coastal erosion, flooding, and infrastructure damage. Utilizing the Debt, Investment, Growth, and Natural Disasters Model, this paper demonstrates that resilient infrastructure investments and effective public investment management are crucial for minimizing gross domestic product contraction following disaster shocks. A key recommendation is implementing a permanent increase in the value added tax rate as part of tax reform. This measure helps finance infrastructure restoration against persistent sea-level rise while simultaneously boosting private investment and long-term growth. To meet the substantial financing needs for climate-resilient infrastructure, RMI must maximize climate funding by improving domestic revenue collection and mobilizing external resources from the renewed Compact and development partners. Given the limited fiscal space, prioritizing adaptation actions while maintaining fiscal sustainability is essential for the nation's future resilience.

Keywords: staff team; infrastructure investment; steady state value; climate change in the Marshall Islands; IMF country; Natural disasters; Infrastructure; Public investment spending; Climate change; Climate finance; Global (search for similar items in EconPapers)
Pages: 17
Date: 2025-12-04
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