Economy of Nauru

File:Map of Nauru 2022.png

Map of Nauru

File:Nauru Tree map.png

Tree map of Nauru

The economy of Nauru is tiny, based on a population in 2019 of only 11,550 people.<ref>2019 Nauru Mini Census https://naurufinance.info/nauru-statistics/</ref> The economy has historically been based on phosphate mining. With primary phosphate reserves exhausted by the end of the 2010s, Nauru has sought to diversify its sources of income. In 2020, Nauru's main sources of income were the sale of fishing rights in Nauru's territorial waters, and revenue from the Regional Processing Centre<ref name=":0">Template:Cite web</ref> (an offshore Australian immigration detention facility).

Nauru is dependent on foreign aid, chiefly from Australia, Taiwan and New Zealand.

Economic performance

In the years after independence in 1968, Nauru possessed the highest GDP per capita in the world due to its rich phosphate deposits.Template:Citation needed In anticipation of the exhaustion of phosphate deposits, a substantial amount of the income from phosphates was invested in trust funds aiming to help cushion the transition and provide for Nauru's economic future. However, because of heavy spending, including poor foreign investment, the government is nowTemplate:When facing bankruptcy. To cut costs the government called for a freeze on wages, a reduction in public service staffing, privatization of numerous government agencies, and closure of some of Nauru's overseas consulates.Template:Citation needed Economic uncertainty caused by financial mismanagement and corruption, combined with shortages of basic goods, resulted in domestic unrest.Template:Citation needed In 2004, Nauru was faced with chaos amid political strife and the collapse of the island's telecommunications system. Moreover, the deterioration of housing and hospitals has continued.Template:Citation needed

Few comprehensive statistics on the Nauru economy exist, with estimates of Nauru's GDP varying widely. According to the U.S. State Department, Nauru's GDP volume was US$1 million in 2004.Template:Request quotation Nauru receives about US$20 million foreign aid a year from Australia.<ref name="autogenerated1">Template:Cite web</ref>

The nation's economy has grown significantly since 2012, with help from the reopening of the Nauru Regional Processing Centre, funded by Australia.<ref>Template:Cite book</ref>

The most recent 2022-23 Nauru Budget recognized expected revenues of $252.5 million and expenditure of $251.9 million (20% increase from Budget 2021–2022) with a $549,000 surplus balance. The surplus will provide cash reserves at the bank and help Nauru manage future economic uncertainties.<ref name=":0" />

Balance of payments

Phosphate is Nauru's only export product, although the government also receives relatively significant foreign exchange income from licensing its rich skipjack tuna fishing grounds to foreign fishing vessels, which land an annual average of 50,000 tonnes of Nauru zone-caught tuna overseas.<ref name="NFMRAplan">Template:Cite web</ref> In 2004 income from phosphate export was US$640,000, with Australia, New Zealand and Japan serving as the country's major export markets. In the same year the Nauru government budget shows that income from licensing foreign fishing vessels was over US$3,000,000.Template:Citation needed

Nauru needs to import almost all basic and capital goods, including food, water, fuel, and manufactured goods, with Australia and New Zealand as its major import sources. In 2004 Nauru's imports totaled about US$19.8 million.<ref name="autogenerated1" />

Finance

Nauru has been a cash economy since at least 2004, after the Bank of Nauru and the Republic of Nauru Finance Corporation went bankrupt and ceased operations in the early 2000s and the licenses of all offshore banks were revoked by the Nauru government in 2004.<ref>Template:Cite web</ref> Nauru uses the Australian dollar for its currency. Most government payments are executed through electronic funds transfer. Electronic funds transfer at point of sale was introduced in 2020. The government is required to periodically fly in Australian currency to maintain liquidity.

On 2 June 2015, an agency of Bendigo and Adelaide Bank, Australia's fifth largest bank, was established in Nauru by the Department of Finance.<ref>Template:Cite web</ref><ref name="ibtimes" /> Effective from the end of April 2016, Westpac, one of Australia's largest banks, ceased to have any dealings with the Nauru government.<ref>Template:Cite web</ref> On 21 April 2016, it was announced that the Bendigo Bank was facing pressure also to close its operation in Nauru.<ref>Template:Cite web</ref>

On 14 November 2023, Bendigo and Adelaide Bank announced its intention to cease operation in Nauru by December 2024.<ref>Template:Cite web</ref> On 24 January 2024, Nauru formally re-established diplomatic ties with the People's Republic of China after withdrawing recognition of Taiwan.<ref>Template:Cite web</ref> In early March 2024, the Bank of China sent a delegation to Nauru to discuss its banking problems. On 18 March, Bendigo and Adelaide Bank announced its intention to delay its exit from Nauru, from December 2024 to July 2025.<ref>Template:Cite web</ref>

Taxation

On October 1, 2014, an income tax was imposed in Nauru for the first time, with high income earners paying a flat rate of 10%. The government spending in 2015 was forecast to be under US$92 million.<ref>"Income taxes coming in Nauru", Radio New Zealand International, 11 June 2014</ref> Taxes include an airport departure tax and a bed tax at the Meneñ Hotel. The 2007–08 Budget saw the increase of existing excises on cigarettes and duty on imports. A tax on sugary foods was also introduced, chiefly to help combat Nauru's diabetes epidemic.<ref>Template:Cite web</ref>

Tax haven status

Historically Nauru was regarded as a tax haven due to the operation of its international financial centre, which offered amongst other things offshore banking services.<ref>Template:Cite web</ref> In 2001, Nauru was blacklisted internationally over concerns it had become a haven for money laundering.<ref name="ibtimes">Template:Cite web</ref> Amendments made in 2004 abolished Nauru's Offshore Banking sector and, as recognised in Nauru's latest anti-money laundering and combating the financing of terrorism (AML/CFT) review, Nauru's offshore sector is now limited to a small offshore company register.<ref>Template:Cite web</ref>

In July 2017 the Organisation for Economic Co-operation and Development (OECD) upgraded its rating of Nauru's standards of tax transparency. Nauru had been listed alongside fourteen other countries that had failed to show that they could comply with international tax transparency standards and regulations. The OECD subsequently put Nauru through a fast-tracked compliance process and the country was given a "largely compliant" rating.<ref>Template:Cite web</ref>

Relationship with Australia

Currently,Template:When Nauru is heavily dependent on Australia as its major source of financial support. In 2001, Nauru signed an agreement with Australia to accommodate asylum seekers (mostly from Iraq and Afghanistan) on the island, in return for millions of dollars in aid. This agreement, referred to as the "Pacific Solution", came to an end in 2007, prompting Nauruan concerns about the future of the island's revenue.<ref>"Nauru 'hit' by detention centre closure", The Age, February 7, 2008</ref> Australia has also sent financial experts to Nauru to help the tiny nation overcome its economic problems. However, serious questions remain about the long-term viability of Nauru's economy, with uncertainties about the rehabilitation of mined land and the replacement of income from phosphates.<ref name="autogenerated1" />

In 2008, talks began between Australia and Nauru regarding the future of the former's economic development aid to the latter. Nauruan Foreign and Finance Minister Dr. Kieren Keke stated that his country did not want aid handouts. One possible solution currentlyTemplate:When being explored would be for Australia to assist Nauru in setting up a "boat repair industry" for regional fishing vessels.<ref>"Nauru suggests boat repair industry" Template:Webarchive, Saipan Tribune, March 4, 2008</ref>

Nauru detention centre

Template:Main The Nauru detention centre was established by the Australian government, with Nauruan agreement, in 2001 to cater for up to 800 refugees and asylum seekers under Australia's Pacific solution. The centre is seen by Nauruans as an important source of employment opportunities, in addition to the pledge of A$20 million for development activities.Template:Citation needed The program was gradually scaled back after 14 detainee deaths, multiple suicide attempts and six referrals to the International Criminal Court.<ref>Template:Cite news</ref>

Economic statistics

• GDP: purchasing power parity - US$60 million (2001 est.)
• GDP per capita: purchasing power parity - US$5,000 (2001 est.)
• Inflation rate (consumer prices): -3.6% (1993)
• Budget: revenues: US$23.4 million; expenditures: US$ million (1995/96)
• External debt: US$33.3 million
• Economic aid - receives around US$2.25 million from Australia (1996/97 est.)
• Currency: Australian dollar

The fiscal year runs from July 1 to June 30.

Employment

• Labour force are mainly employed in mining phosphates, public administration by RONPhos, education and transport
• In 2004, the unemployment rate was close to 90%.<ref name="CIA WF">Template:Cite web</ref> In February 2008, foreign affairs minister Dr. Kieren Keke stated: "We have got a major unemployment crisis in front of us."<ref>Template:Cite news</ref> By 2011, the unemployment rate had decreased to 23%.<ref name="CIA WF"/>
• Main industries are phosphate mining, offshore banking, coconut products
• Electricity production (fossil fuels) and consumption are around 30 GWh (2000)
• Agriculture is not a major employer, coconuts are the main produce

Data

The following table shows the main economic indicators in 2004–2022 (with IMF staff estimates for 2019–2027). Inflation below 3% is in green.<ref>Template:Cite web</ref>

Year	GDP (in mil. US$PPP)	GDP per capita (in US$ PPP)	GDP (in mil. US$ nominal)	GDP per capita (in US$ nominal)	Inflation rate	Government debt (as % of GDP)
2004	Template:Increase35	Template:Increase3,174.9	Template:Increase32	Template:Increase3,504.2	n/a	n/a
2005	Template:Decrease36	Template:Decrease3,167.6	Template:Decrease31	Template:Increase3,647.1	Template:IncreaseNegative8.6%	n/a
2006	Template:Decrease40	Template:Increase3,200.7	Template:Decrease29	Template:Increase4,438.1	Template:IncreaseNegative19.3%	n/a
2007	Template:Increase32	Template:Increase3,487.7	Template:Decrease23	Template:Decrease3,487.7	Template:IncreaseNegative5.6%	n/a
2008	Template:Increase40	Template:Increase3,965.3	Template:Increase37	Template:Increase4,207.1	Template:IncreaseNegative1.03%	n/a
2009	Template:Increase43	Template:Increase4,587.7	Template:Increase44	Template:Increase4,541.9	Template:Increase3.5%	Template:DecreasePositive247.9%
2010	Template:Increase49	Template:Increase4,748.1	Template:Increase47	Template:Increase4,892.8	Template:IncreaseNegative-1.9%	Template:DecreasePositive243.2%
2011	Template:Increase55	Template:Increase6,529.4	Template:Increase66	Template:Increase5,473.5	Template:IncreaseNegative-3.3%	Template:DecreasePositive188.1%
2012	Template:Increase62	Template:Increase9,382.6	Template:Increase97	Template:Increase5,980.83	Template:Increase0.2%	Template:DecreasePositive127.5%
2013	Template:Increase83	Template:Decrease9,103.5	Template:Increase99	Template:Increase7,642.4	Template:IncreaseNegative-1.1%	Template:DecreasePositive121.6%
2014	Template:Increase107	Template:Decrease8,865.6	Template:Increase105	Template:Increase9,042.8	Template:Increase0.2%	Template:DecreasePositive105.8%
2015	Template:Increase112	Template:Decrease6,994.1	Template:Decrease87	Template:Decrease8,974.5	Template:IncreaseNegative9.7%	Template:DecreasePositive80%
2016	Template:Increase116	Template:Increase7,674.4	Template:Increase100	Template:Decrease8,927.4	Template:IncreaseNegative8.1%	Template:DecreasePositive79.5%
2017	Template:Decrease112	Template:Increase8,152.9	Template:Increase110	Template:Decrease8,341.6	Template:IncreaseNegative5.1%	Template:DecreasePositive77.5%
2018	Template:Increase121	Template:Increase9,398.5	Template:Increase124	Template:Increase9,197.2	Template:Increase0.4%	Template:DecreasePositive75.1%
2019	Template:Increase125	Template:Decrease9,365.4	Template:Decrease119	Template:Increase9,856.4	Template:IncreaseNegative4.3%	Template:DecreasePositive62.8%
2020	Template:Increase127	Template:Decrease8,866.8	Template:Decrease114	Template:Decrease9,852.9	Template:IncreaseNegative-6.5%	Template:DecreasePositive61.3%
2021	Template:Increase134	Template:Increase10,139.1	Template:Increase133	Template:Increase10,221.4	Template:Increase1.2%	Template:DecreasePositive27%
2022	Template:Increase145	Template:Decrease10,004.7	Template:Increase134	Template:Increase10,834.3	Template:Increase2.0%	Template:IncreaseNegative27.3%
2023	Template:Increase154	Template:Increase10,096.2	Template:Increase138	Template:Increase11,228.6	Template:Increase2.0%	Template:DecreasePositive24.9%
2024	Template:Increase161	Template:Increase10,162.8	Template:Increase142	Template:Increase11,512.8	Template:Increase2.0%	Template:DecreasePositive22.8%
2025	Template:Increase167	Template:Decrease10,156.6	Template:Increase144	Template:Increase11,733.4	Template:Increase2.0%	Template:DecreasePositive20.9%
2026	Template:Increase173	Template:Decrease10,088.1	Template:Increase146	Template:Increase11,934.3	Template:Increase2.0%	Template:DecreasePositive19%
2027	Template:Increase180	Template:Decrease10,071.5	Template:Increase149	Template:Increase12,150.8	Template:Increase2.0%	Template:DecreasePositive16.5%

Trade

• Exports - valued at US$30 million (2018). Fish, calcium phosphates, low-voltage protection equipment, air conditioners, leather apparel. Major trading partners include Thailand 34%, Australia 16%, United States 13%, and South Korea 10%.
• Imports - valued at US$90 million (2018). Refined petroleum, construction vehicles, tug boats, poultry meats, cars. Major partners are Taiwan 52% and Australia 28%.

See also

• Phosphate mining in Nauru
• Nauru Phosphate Corporation
• Nauru Phosphate Royalties Trust
• Ministry of Finance of Nauru
• Tourism in Nauru

External links

• "Nauru seeks to regain lost fortunes", Nick Squires, BBC, March 15, 2008
• "Nauru's riches to rags decline", Dan Nolan, Al Jazeera, March 17, 2008