ADB Approves $20M to Boost Fiscal Resilience and Disaster Response in Vanuatu

The policy-based grant supports reforms aimed at enhancing domestic resource mobilization, improving public expenditure efficiency, and strengthening debt management practices.

The Asian Development Bank (ADB) has approved $20 million in financing to strengthen fiscal sustainability and enhance Vanuatu’s capacity to respond swiftly and effectively to disasters, supporting the country’s long-term resilience amid rising climate and economic shocks.

The financing package combines a $10 million policy-based grant with a $10 million multi-year contingent disaster financing (CDF) facility, including a replenishment option, under ADB’s Enduring Fiscal Position Program. This integrated approach links structural fiscal reforms with rapid-access disaster funding, enabling Vanuatu to manage fiscal risks proactively while ensuring immediate liquidity in times of crisis.

Strengthening fiscal sustainability through reforms

The policy-based grant supports reforms aimed at enhancing domestic resource mobilization, improving public expenditure efficiency, and strengthening debt management practices. These measures are designed to expand and diversify the revenue base, improve budget planning and execution, and reinforce fiscal discipline, helping Vanuatu maintain macroeconomic stability over the medium term.

A key focus of the program is the management of fiscal risks arising from state-owned enterprises (SOEs) and public–private partnerships. Central to this effort is the enactment of the Commercial Government Business Enterprise Act 2025, which establishes a clearer legal and regulatory framework for commercial SOEs. The legislation strengthens transparency, accountability, and oversight, improves financial performance, and enhances service delivery, while reducing the burden of contingent liabilities on public finances.

“The Government of Vanuatu has undertaken important initial reforms to strengthen fiscal resilience and improve the performance of the country’s SOEs so they can deliver quality services for the Ni-Vanuatu people,” said Jyotsana Varma, Regional Director of ADB’s Pacific Liaison and Coordination Office. “These reflect the government’s ambition and appetite for reform, and this program will help build systems and capacities for sustained fiscal sustainability, as well as support faster and more effective disaster response.”

Enhancing disaster preparedness and rapid response

The contingent disaster financing (CDF) component provides immediate and flexible budget support following natural disasters or health emergencies, allowing the government to mobilize resources quickly without disrupting development spending. This is particularly critical for Vanuatu, one of the world’s most disaster-prone countries, frequently affected by cyclones, earthquakes, volcanic activity, and climate-related shocks.

Through the CDF, the program supports three key disaster resilience frameworks, including the approval and implementation of a digital health strategy. The strategy aims to ensure continuity of health services during disasters, reduce health impacts from environmental shocks, and address emerging risks from vector-borne and waterborne diseases, which are exacerbated by climate change.

By linking disaster financing with policy reforms and technical assistance, the program strengthens institutional capacity, improves preparedness, and supports long-term resilience across health, fiscal, and disaster risk management systems.

Financing support and development impact

The $20 million package is financed through ADB’s Asian Development Fund (ADF), which provides grants to the poorest and most vulnerable countries in Asia and the Pacific. Between 2021 and 2024, the ADF helped 384,000 people escape poverty and supported the creation of around 500,000 jobs, underscoring its role in advancing inclusive and sustainable development.

The program is further reinforced by parallel cofinancing from the governments of Australia and New Zealand, as well as the World Bank, highlighting strong development partner coordination in support of Vanuatu’s reform agenda.

ADB emphasized that the combined use of policy-based financing and contingent disaster support offers a cost-effective and resilient financing model for small island developing states, enabling them to strengthen fiscal foundations while responding swiftly to increasingly frequent and severe shocks.