Vanuatu

Key trends and development challenges

Vanuatu is an independent republic located in the Pacific sub-region of Melanesia. With a GDP of $984 million, Vanuatu is the fourth-largest economy in the Pacific, and accounts for 2.4% of regional GDP. Vanuatu has a population of 326,000 (2022), resulting in a GDP per capita of $3,000, ranking 12th in the Pacific. Its Exclusive Economic Zone (EEZ) covers more than 663,000 square kilometres, the 39th-largest globally, and is comparable in size to the EEZ of China.

Vanuatu has the tenth-highest Official Development Assistance (ODA) to Gross National Income (GNI) ratio in the Pacific Islands region, with aid accounting for 11% of national income. In a global context, Vanuatu remains among the most aid-reliant countries in the world, ranking 21st among 127 developing countries for its ODA/GNI ratio. The Vanuatu government’s development agenda highlights the need for a balance between the social, environmental, and economic pillars of sustainable development. At 0.614, Vanuatu’s Human Development Index score ranks 140th out of 193 ranked countries.

Between 2008 and 2022, annual Official Development Finance (ODF) disbursements to Vanuatu — including grants, loans, and other forms of assistance — averaged $183 million. Almost a quarter (19%) of the development finance received by Vanuatu between 2008 and 2022 came in the form of loans, predominantly provided by China for roads projects. Principal among these has been the multi-stage Tanna and Malekula Road rehabilitation program, which has seen total debt-financed spending of more than $155 million.

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 (80%) of ODF support to Vanuatu has come from five development partners, led by Australia (37%), China (16%), New Zealand (12%), Japan (9%), and the World Bank (6%). 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 $119 million in development financing with a “principal” focus on either climate adaptation or mitigation. Over this same period, the country has seen $585 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 make up 6% of total spending, below the regional average of 9%. Conversely, spending on “significant” climate projects in Vanuatu makes up 22% of incoming funds, well above the regional average of 13%.

Between 2008 and 2022, Vanuatu received $131 million in development financing with a “principal” focus on gender equality, and $807 million in development financing with a “significant” focus on gender equality. “Principal” gender equality financing constituted 5% of ODF received by the country, well above the regional average of 2%. Similarly, “significant” marked gender financing made up 28% of incoming ODF, also well above the regional average of 21%. The largest project targeting gender equality outcomes in Vanuatu was the $21 million Vanuatu–Australia Policing and Justice Program, funded by Australia.