Economy of Vanuatu

Exports and Imports

Vanuatu primarily exports agricultural products like kava (a pepper plant), copra (dried coconut kernel), and fish. Recently, non-fillet frozen fish has become a major export, valued at over $30 million in 2022. Thailand, Japan, and South Korea are their top trading partners. Imports focus on machinery, food, and fuel, with Australia and Fiji as key import sources.

Balance of Trade

Vanuatu faces a negative trade balance, meaning the value of imports is consistently higher than exports. This trend has improved slightly in recent years. Data from the World Bank suggests a trade deficit of around 10% of GDP in 2022

Infrastructure Development

Vanuatu's infrastructure is developing, but faces challenges. Road networks are limited, with most roads being unsealed. The total road length in Vanuatu is estimated to be around 1,800 kilometers, with significant portions requiring improvement.The government is investing in improving roads and bridges, along with other infrastructure projects like wharfs and airports.

Fiscal Policy

The Vanuatu government aims to balance its budget through a combination of moderate spending and taxes. However, achieving this balance can be difficult. Recent data from the IMF suggests a net government budget deficit of around 7.5% of GDP in 2024

Monetary Policy

Vanuatu pegs its currency, the Vanuatu vatu (VT), to a basket of currencies including the Australian dollar and French franc. This helps maintain price stability. The Reserve Bank of Vanuatu plays a limited role in monetary policy due to the currency peg.

Trade Agreements

Vanuatu participates in several regional trade agreements, such as the Pacific Island Countries Trade Agreement (PICTA) and the Melanesian Spearhead Group (MSG) Trade Agreement. These agreements aim to boost trade between member countries.

Environmental Regulations

Vanuatu faces environmental challenges like deforestation and climate change. The government has implemented regulations to address these issues, focusing on sustainable resource management and disaster risk reduction.

Tax System in Vanuatu

Corporate tax rate: There is no corporate income tax on income derived in Vanuatu by resident and non-resident companies
Sales tax: Vanuatu applies a Value Added Tax (VAT) of 12.5% on most goods and services. This rate has been steady in recent years
Property tax: An annual property tax based on land value is levied in Vanuatu. Rates may vary depending on location and property type. You can find recent property tax rate
Tax deductions and credits: Vanuatu offers tax deductions and credits for various purposes, including business expenses (up to a certain limit) and charitable donations. Specific details and limitations on these deductions and credits can be found on the Vanuatu government tax website
Tax compliance: The Vanuatu government is working on improving tax collection efficiency. While specific data may be difficult to find, there have been initiatives in recent years to strengthen tax administration
Tax burden: Compared to some Pacific Island nations, Vanuatu's tax burden is considered moderate. The absence of income and corporate taxes contributes to this. Data suggests the overall tax revenue hovers around 15-18% of GDP