ADB's Work in Vanuatu

Vanuatu is an archipelago with a population of 300,000 people spread across 84 volcanic islands in the West Pacific. The collapse of tourism has made Vanuatu’s economic growth increasingly dependent on passport sales, public infrastructure spending, private sector construction activities, and aid flows. Rural populations are engaged in subsistence farming and limited production of copra, beef, cocoa, tuna, and kava for export.

Trade and travel disruptions associated with the coronavirus disease (COVID-19) pandemic have affected Vanuatu’s supply chains—compounding cost challenges related to the country’s distance from markets and import dependence. The intermittent closing of borders since March 2020 has led to a collapse of the tourism market, with associated socioeconomic costs.

ADB has supported Vanuatu since 1981 to build physical and economic resilience, upgrade transport and energy assets, improve urban infrastructure and health systems, and improve the performance of stateowned enterprises. Ongoing assistance is supporting the country to address immediate needs linked to COVID-19, while ADB longer-term support aims to strengthen institutions to improve infrastructure and service delivery.

To date, ADB has committed 97 public sector loans, grants, and technical assistance totaling $204.4 million to Vanuatu. Cumulative loan and grant disbursements to Vanuatu amount to $111.3 million. These were financed by concessional ordinary capital resources, the Asian Development Fund, and other special funds. ADB’s ongoing sovereign portfolio in Vanuatu includes 4 loans and 10 grants worth $94.1 million.

In 2021, ADB committed a $5 million project readiness facility to finance due diligence on future maritime and aviation sector investments.

Phase 3 of ADB’s Pacific Disaster Resilience Program will provide a $5 million contingent disaster financing grant for early recovery and reconstruction activities following a disaster. The Greater Port Vila Urban Resilience Project will improve urban resilience through capacity building, institutional strengthening, and the construction of three multipurpose emergency shelters.

A $21.1 million project is expanding access to electricity on the islands of Espiritu Santo and Malekula. Hydropower will replace costly diesel generation, and power grid extensions will improve livelihood opportunities for rural populations.

The $29.3 million project to support interisland shipping is contributing to infrastructure investments and subsidizing the expansion of shipping services to remote destinations.

In addition, ADB provided a $19 million in a loan and two grants to strengthen children’s immunization programs and fund the rollout of COVID-19 vaccines.

The Interisland Shipping Support Project will finance a new interisland shipping terminal in the capital, Port Vila, with improved berthing facilities and new and upgraded jetties on five outer islands. Photo: Eric Sales/ADB

Operational Challenges. Natural disasters and climatic events in Vanuatu risk diverting resources away from development and toward reconstruction. Ranked the most vulnerable country in the world to disasters triggered by natural hazards and the effects of climate change, Vanuatu continues to rehabilitate infrastructure damaged by the 2020 category five Cyclone Harold that damaged crops and produced cascading effects on employment and the economy.

Further, Vanuatu’s small population and remoteness raises the cost of providing public services and infrastructure while limiting economies of scale. The small population also leads to capacity gaps in the public and private sectors.

ADB’s approach in Vanuatu emphasizes consultative and flexible programming, long-term engagement, and the importance of capacity development. To support reforms implementation and capacity building, ADB will continue to provide technical assistance and coordinate with other development partners.

Knowledge Work

ADB has supported the Vanuatu National Statistics Office to strengthen governance and enhance its capacity to produce economic information. Vanuatu continues to face capacity constraints and knowledge gaps in relation to private sector development. Phase four of the Pacific Private Sector Development Initiative (PSDI) is working with the Vanuatu National Provident Fund to improve operations, financial sustainability, investment management capability, and provision of long-term domestic finance. In 2021, PSDI published a regional tourism assessment and tourism snapshots for all 14 Pacific developing member countries and launched Leadership Matters: Benchmarking Women’s Business Leadership in the Pacific, which collects and analyzes women’s business leadership data.

  ADB Projects in Vanuatu Project data sheets for loans, grants, TAs

Future Directions

ADB’s assistance to Vanuatu will continue to support ongoing investments to improve transport connectivity, energy access, and urban development. Additional financing is required for the Interisland Shipping Support Project; and ADB intends to support better water supply, sanitation, and solid waste management through the Luganville Urban Water Supply and Sanitation Project. An urban backyard gardening project with microenterprise development initiatives will help prevent vulnerable women from experiencing further marginalization from the prolonged impacts of COVID-19. A performancebased grant will support finance sector reform with a focus on strengthening anti-money laundering and counter-terrorism financing protections. Technical support through ADB’s country and regional programs will continue to provide flexible and responsive assistance to meet Vanuatu’s development goals in support of a more sustainable growth trajectory.

Last updated: 25 August 2022