The IMF welcomed the Republic of Nauru as its newest member on April 12. The island adds its name to the list of 188 other IMF member countries.
Mr. David Adeang, Minister of Finance of Nauru, signed the Articles of Agreement of the IMF at a ceremony held at the State Department in Washington, D.C. IMF officials witnessed the signing ceremony.
“I am very pleased to welcome Nauru as a member of the IMF,” said Christine Lagarde, the IMF’s Managing Director. “As Nauru faces a number of challenges common to small island economies, including its geographical remoteness and climate change, it will benefit from participating fully in the economic cooperation of our global membership. The IMF stands ready to assist the government and people of Nauru in achieving their development objectives in cooperation with other partners in the international community,” she added.
Measured by its quota, Nauru will be the second smallest member of the Fund, after Tuvalu. This will be the case after it pays its quota increase under the 14th General Review (which will increase its quota to SDR 2.8 million). Nauru has an initial subscription of SDR 2 million, or about $2.81 million. It has a population of about 10,500 and a land area of about 8 square miles, compared with 68 square miles for Washington DC. Nauru is also the smallest sovereign state in the world after the Vatican City in terms of both population and area. The Australian dollar is the legal tender. There had been virtually no bank in the country during the past decade until the opening of Bendigo Bank agency in June 2015.
Nauru’s economy relies on phosphate mining, the Australian Regional Processing Center (RPC) for asylum seekers, and revenue from fishing license fees. In recent years, growth has been strong, mainly driven by the RPC operations and phosphate exports, although it has moderated in 2015 due to problems with the seaport that lowered phosphate exports.
The country faces a number of challenges common to small islands: small population, remoteness, climate change, narrow production base, high cost of public goods, and insufficient infrastructure. The key priorities include strengthening public finances, improving basic infrastructure, and diversifying its sources of growth.
Membership allows the Fund and other development partners—the country has also joined the World Bank—to help the authorities implement economic reforms and tackle the development challenges facing Nauru. The country can now benefit from an annual review or “health check” of its economy by the IMF (called the Article IV consultation), cross-country analysis and access IMF lending. Nauru will continue to receive technical assistance through Pacific Financial Technical Assistance Center (PFTAC) based in Fiji.
Nauru can now also attend the joint IMF-World Bank Spring and Annual Meetings as a full member of the Bretton Woods family, where the authorities can meet and exchange views with other delegations. The 2016 Spring Meetings will be held this week, April 15–17.
The Republic of Nauru applied for membership to the IMF and the World Bank in April 2014. IMF staff then worked intensively with the authorities through the IMF’s Resident Representative for the Pacific Islands and the PFTAC to manage the membership process for the past two years. A joint IMF-World Bank membership mission took place in May 2015. A Membership Committee composed of members of the IMF Executive Board was formed and discussed Nauru’s proposed quota in August 2015. The IMF Board of Governors adopted a membership resolution in November 2015 offering admission to the country.