Vanuatu

Key trends and development challenges

Vanuatu is an independent republic located in the Pacific sub-region of Melanesia. With a GDP of $1.03 billion, Vanuatu is the fifth-largest economy in the Pacific Islands and accounts for 2.4% of regional GDP. Vanuatu has a population of 320,000, resulting in a GDP per capita of $3,300, ranking 11th in the Pacific. Its exclusive economic zone (EEZ) spans 663,200 square kilometres, the 39th-largest globally, comparable in size to the EEZ of Malaysia.

Vanuatu has the tenth-highest official development assistance (ODA) to gross domestic product (GDP) ratio in the Pacific Islands region, with aid accounting for 21% of GDP. In a global context, Vanuatu remains among the most aid-reliant countries in the world, with its aid as a share of GDP ranking 20th among 125 developing countries.

The Vanuatu government’s development agenda highlights the need for a balance between the social, environmental, and economic pillars of sustainable development. At 0.621, Vanuatu’s Human Development Index score ranks 146th out of 193 ranked countries.

Between 2008 and 2023, annual official development finance (ODF) disbursements to Vanuatu — including grants, loans, and other forms of assistance — averaged $190 million. Around a fifth (19%) of the development finance received by Vanuatu during this period came in the form of loans, predominantly provided by China for roads projects. Principal among these has been the multi-stage Tanna and Malekula Roads rehabilitation program, which has seen total debt-financed spending of more than $155 million. The International Monetary Fund ranks Vanuatu’s risk of debt distress as high.

Development partners and sector trends

The share of loans in Vanuatu’s total incoming development assistance has increased dramatically over the past decade. Between 2008 and 2013, loans made up less than 2% of incoming funds, but since 2016 they have accounted for close to a third. The International Monetary Fund ranks Vanuatu’s risk of debt distress as high.

The vast majority (84%) of ODF support to Vanuatu in 2023 came from five development partners, led by Australia (36%), China (18%), the World Bank (11%), Japan (10%), and New Zealand (9%).

ODF disbursements in Vanuatu were largely consistent with regional trends in terms of sector distribution. The transport sector featured prominently, accounting for more than a quarter of incoming financing. Vanuatu also sees higher-than-average spending in the education and humanitarian aid sectors, the latter a product of the country’s intense exposure to climatic disaster events.

From 2014 onwards, Vanuatu has seen a greater emphasis on infrastructure spending. Vanuatu was one of a small number of Pacific states that did not see a significant spike in human development spending during the pandemic.

Since 2008, Vanuatu has received $209 million in development financing with a “principal” focus on either climate adaptation or mitigation. Over this same period, the country has seen $551 million in development financing with a “significant” focus on climate outcomes. Since the mid-2010s, Vanuatu has seen a substantial rise in spending on climate-targeting projects. As a share of total ODF received by Vanuatu, “principal” climate projects made up 7% of total spending, slightly below the regional average of 8%. Conversely, spending on “significant” climate projects in Vanuatu made up 18% of incoming funds, well above the regional average of 11%.

Between 2008 and 2023, Vanuatu received $89 million in development financing with a “principal” focus on gender equality, and $750 million in development financing with a “significant” focus on gender equality. “Principal” gender equality financing constituted 3% of ODF received by the country, slightly above the regional average of 2%. Similarly, “significant” marked gender financing made up 25% of incoming ODF, above the regional average of 22%. The largest project targeting gender equality outcomes in Vanuatu was the $21 million Vanuatu–Australia Policing and Justice Program project, funded by Australia.