ADB's Work in Vanuatu

Community transmission of the coronavirus disease (COVID-19) and related containment restrictions constrained economic activity in Vanuatu in 2022. After travel restrictions were eased in July 2022, international travel resumed from the main tourism source markets of Australia, New Caledonia, and New Zealand.

Vanuatu became a member of ADB in 1981. To date, ADB has committed 98 public sector loans, grants, and technical assistance totaling $210.3 million to Vanuatu. Cumulative loan and grant disbursements to Vanuatu amount to $128.25 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 3 loans and 8 grants worth $70 million.

In 2022, ADB approved a $5.25-million grant for the COVID-19 Response for Affected Poor and Vulnerable Groups in the Pacific with a focus on food security and income-generating support delivered to poor and vulnerable women, and multidisciplinary responses to gender-based violence. ADB provided further $3-million grant for the Greater Port Vila Urban Resilience Project for capacity building, institutional strengthening, and the construction of two multipurpose emergency shelters.

ADB’s Pacific Disaster Resilience Program (Phase 3) disbursed a $5-million budget support grant to Vanuatu in recognition of the fiscal challenges posed by the pandemic. Pre-implementation activities such as design works progressed for the Luganville Urban Water Supply and Sanitation Project. Consulting contracts were signed under the $5-million Transport Sector Project Readiness Preparatory Financing, and ADB commenced feasibility studies for a maritime investment scheduled for 2024.

ADB and its counterparts achieved significant physical progress on projects in 2022. The Brenwe hydropower plant and the transmission grid extensions under the Energy Access Project will be commissioned by mid-2023, and remediation works on the Lenakel and Litlitz wharves were completed in 2022. The System Strengthening for Effective Coverage of New Vaccines in the Pacific Project continued to roll out new vaccines and build capacity in the health sector.

ADB delivered record grant contributions to Vanuatu in 2021, approving two grants to address the combined effects of Cyclone Harold and the COVID-19 pandemic in 2021 and 2022. A $1-million grant from the Asia Pacific Disaster Response Fund assisted Tropical Cyclone Harold recovery efforts, while a separate $1.5-million grant from the same fund supported COVID-19 Emergency Response. ADB also provided $16.9 million to alleviate the socioeconomic impacts of the pandemic while enhancing the government’s fiscal space in delivering its socioeconomic stimulus programs.

A young boy watches a cruise ship arrive in Pentecost Island, Vanuatu. Photo: David Kirkland

Operational challenges. In 2021, Vanuatu was ranked as the world’s most vulnerable country to disasters triggered by natural hazards. Its vulnerability stems from limited institutional and economic capacity to cope with the impacts of disasters and climate change. Policy continuity and project implementation are key challenging issues. At the same time, Vanuatu suffers from inadequate transport infrastructure, high transport costs, and irregular transport services. With a small domestic market, narrow economic base, and low economic diversification, creating an environment that fosters inclusive and environmentally sustainable growth will remain a challenge. Furthermore, COVID-19-related border closures imposed significant delays and led to cost overruns across the ADB project portfolio, highlighting Vanuatu’s dependence on international contractors. As confidence returns in the international travel market, domestic businesses have reported that staff retention problems are constraining their operations.

Knowledge Work

Vanuatu continues to face capacity constraints and knowledge gaps that affect public and private sector performance, social and environmental safeguards, and gender equality. ADB is supporting the Vanuatu National Statistics Office in strengthening governance and enhancing capacity to produce economic data to inform evidence-based decision-making. The ADB-supported Pacific Region Infrastructure Facility undertook a study titled Enhancing Procurement Practice and Local Content in Pacific Infrastructure, which explores opportunities in infrastructure procurement in the Pacific to increase economic growth, jobs, and broader development outcomes. The Pacific Private Sector Development Initiative (PSDI) is working with several agencies to improve operations, financial sustainability, and investment management capability and provision of long-term domestic finance. In 2022, PSDI published Reopening Borders to Tourism in Pacific Island Countries: Key Lessons and Guidance featuring lessons from countries in the Pacific and around the world that have reopened after the COVID-19 pandemic. ADB’s knowledge support to Vanuatu helps decision makers by providing critical data and analytics on which to base sound decisions and future planning.

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

Future Directions

ADB operations in Vanuatu are aligned with the strategic priorities set out in Vanuatu 2030: The People’s Plan, which sets the priority of improving the lives and livelihoods of the people of Vanuatu. ADB operations will leverage the opportunities set forth in ADB’s Strategy 2030 to deliver economically productive project interventions. ADB has committed a combined $8 million in grants for project readiness facilities with the express goal of preparing project designs to support efficient implementation. The project portfolio, both under preparation and implementation, aims to strengthen the sectors of public fiscal management, transport, urban infrastructure, renewable energy, disaster risk management, water and sanitation, finance, health, and education.

Last updated: 4 May 2023