The International Monetary Fund’s Executive Board concluded the 2025 Article IV consultation with the Republic of Palau, judging that the economic recovery is underway with improving fiscal balances, declining debt and well-contained inflation, while noting debt remains high and risks are tilted to the downside. The assessment highlighted solid growth of an estimated 6.7% in FY2025 following a 12% rebound in FY2024, with growth projected at 4.1% in FY2026 as tourism and construction continue to support activity. Policy priorities centred on finalising and implementing fiscal and debt strategies to reduce debt, improve spending efficiency and strengthen revenue mobilisation through better tax administration, alongside stronger fiscal risk management including swift pension reform implementation and enhanced oversight and governance of state-owned enterprises. On financial stability, the Board called for stronger supervision and regulation, including bolstering the Financial Institutions Commission, improving oversight of the National Development Bank of Palau and updating the legal and regulatory framework; it also urged that payment-system improvements be guided by a tailored domestic payment strategy and that any tokenized dollar initiative proceed cautiously, supported by a comprehensive cost-benefit analysis, a full feasibility study, risk-mitigating safeguards and a strengthened AML/CFT framework. Palau’s authorities consented to publication of the staff report, which the IMF indicated will be published shortly.

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