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Republic of Marshall Islands: Selected Issues

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  • 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.

Suggested Citation

  • International Monetary Fund, 2025. "Republic of Marshall Islands: Selected Issues," IMF Staff Country Reports 2025/322, International Monetary Fund.
    • Handle: RePEc:imf:imfscr:2025/322
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