Pacific Islands news and development

14 April 2016

Nauru's adventures in international finance: World Bank comes as Westpac leaves

On Wednesday, the Republic of Nauru—est. population 10,500—became the 189th full member of the World Bank and the International Monetary Fund.

The International Bank for Reconstruction and Development (IBRD) approved the membership in November, 2015 and Nauru's finance minister, Mr David Adeang, signed the relevant Articles of Agreement at a press event at the US State Department in Washington, D.C.
 

However the move comes just as leading Australian bank Westpac is severing ties with Nauru. Quoting anonymous sources, the Australian Broadcasting Corporation reports that Westpac is exiting the country "after concerns were raised by the bank's anti-money laundering and counter-terrorism financing experts". Nauru says the story is a "fabrication". 

The IMF requires an applicant country "to be in control of its own foreign affairs". Deemed as such, the IMF says Nauru "can now also attend the joint IMF-World Bank Spring and Annual Meetings as a full member of the Bretton Woods family". This means that Nauru, administered by Australia until independence in 1968, signed up just in time for Minister Adeang to attend this week's 2016 Spring meeting, which runs from today till Sunday in D.C. 

For its US$58.6 million in subscriptions Nauru gets just  0.05 per cent of total voting rights.

We asked the World Bank's Pacific Islands unit several questions about the process of joining "the Bank".

PACDEV: Could you briefly outline the process through which Nauru has joined the WBG? Was it invited? Does it ask? Is it sponsored?
WORLD BANK: In April 2014, Nauru submitted an application to join the IMF, followed by an application for IBRD membership, on its own volition.
PD: What due diligence is the WB required to undertake in assessing Nauru's eligibility for membership? 
WB: The IMF provided technical assistance to Nauru to update macroeconomic data required to calculate Nauru’s IMF and IBRD membership subscription. Through joining the IMF and IBRD, Nauru becomes subject to normal membership requirements, including periodic Article IV consultations with the IMF on Nauru’s macroeconomic position.
PD: When did discussions of joining the bank take place? Who were the principals consulted?
WB: Discussions required during the World Bank application process usually take place between relevant government ministers, high-level government officials and the World Bank’s Corporate Secretariat Vice Presidency, along with other senior World Bank Group staff. During the major membership mission to Nauru in May 2015, World Bank and IMF teams were received by the President of Nauru and Cabinet, as well as private sector and donor representatives.
PD: What happens now? Is there a draft country programme?
WB: Nauru will be included in the Regional Partnership Framework (FY17-FY21) currently under development by the World Bank Group, which will guide our broader engagement in the Pacific region in coming years.
Nauru adds the IMF and the World Bank to its burgeoning international schedule:
  • the United Nations, 
  • the Commonwealth of Nations, 
  • the Lomé Convention, 
  • the Alliance of Small Island States, 
  • the Asian Development Bank, 
  • the Economic and Social Commission for Asia and the Pacific,
  • the Food and Agriculture Organization, 
  • the G-77, 
  • the International Civil Aviation Organization, 
  • the International Olympic Committee, and 
  • the International Telecommunications Union.
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