Tuvalu Fourth Development Policy Operation

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The development policy operation (DPO) of US$7.5 million equivalent is the second of a programmatic series of two DPOs. Building on the first DPO, the operation continues to support the reform agenda of the Government of Tuvalu (GoT) in the critical areas of: (i) improving health and education service delivery; and (ii) building macroeconomic sustainability. These two areas are central to the GoT’s National Strategy for Sustainable Development (NSSD) or Te Kakeega III (TKIII), and to the Regional Partnership Framework (RPF) for nine small Pacific Island Countries FY2017‐FY2022 including Tuvalu. The DPO is part of a coordinated budget support mechanism through which Australia, New Zealand, the Asian Development Bank (ADB), and the European Union (EU) also provide budget support. The DPO focuses on improving the delivery of education and health services and improving macroeconomic stability. The reforms under the first pillar, improving social service delivery, are focused on improving longer‐term education outcomes through supporting improved early childhood education and care (ECCE); and supporting improved health sector outcomes through reducing risk factors for non‐communicable diseases (NCDs). The reforms under the second pillar of the operation aim at improving macroeconomic stability through strengthening the investment management of the country’s reserve assets; improving the costing and budgeting for public sector wage‐bill decisions; and operationalizing the framework for banking oversight. Financing provided through this operation will continue to directly support the maintenance of fiscal buffers and meet Tuvalu’s long‐term financing needs. The operation will also sustain the reform momentum built throughout the previous operations in the current and the previous programmatic series of DPOs. This second operation of a programmatic series is expected to support the GoT’s development objectives and contribute to the improved wellbeing of Tuvaluans, while supporting the maintenance of buffers to meet long‐term financing needs.