The economy of Nauru is tiny, based on a population in 2019 of only 11,550 people. The economy has historically been based on

phosphate mining In chemistry, a phosphate is an anion, salt, functional group or ester derived from a phosphoric acid. It most commonly means orthophosphate, a derivative of orthophosphoric acid . The phosphate or orthophosphate ion is derived from pho ...

. With primary phosphate reserves exhausted by the end of the 2010s, Nauru has sought to diversify its sources of income. In 2020, Nauru's main sources of income were the sale of fishing rights in Nauru's territorial waters, and revenue from the Regional Processing Centre (an offshore Australian immigration detention facility). Nauru is dependent on foreign aid, chiefly from

Australia Australia, officially the Commonwealth of Australia, is a sovereign country comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands. With an area of , Australia is the largest country by ...

Taiwan Taiwan, officially the Republic of China (ROC), is a country in East Asia, at the junction of the East and South China Seas in the northwestern Pacific Ocean, with the People's Republic of China (PRC) to the northwest, Japan to the no ...

and

New Zealand New Zealand ( mi, Aotearoa ) is an island country in the southwestern Pacific Ocean. It consists of two main landmasses—the North Island () and the South Island ()—and over 700 smaller islands. It is the sixth-largest island coun ...

Economic performance

In the years after independence in 1968, Nauru possessed the highest GDP per capita in the world due to its rich phosphate deposits. In anticipation of the exhaustion of its phosphate deposits, substantial amounts of the income from phosphates were invested in trust funds aimed to help cushion the transition and provide for Nauru's economic future. However, because of heavy spending from the trust funds, including some wasteful foreign investment activities, the government is now facing virtual bankruptcy. To cut costs the government called for a freeze on wages, a reduction of overstaffed public service departments, privatization of numerous government agencies, and closure of some of Nauru's overseas consulates. Economic uncertainty caused by financial mismanagement and corruption, combined with shortages of basic goods, resulted in some domestic unrest. In 2004 Nauru was faced with chaos amid political strife and the collapse of the island's telecommunications system. Moreover, the deterioration of housing and hospitals has continued. Few comprehensive statistics on the Nauru economy exist, with estimates of Nauru's GDP varying widely. According to the U.S. State Department, Nauru's GDP volume was US$1 million in 2004. Nauru receives about US$20 million foreign aid a year from Australia. The nations economy has grown significantly since 2012, with help from the reopening of the

Nauru Regional Processing Centre The Nauru Regional Processing Centre is an offshore Australian immigration detention facility in use from 2001 to 2008, from 2012 to 2019, and from September 2021. It is located on the South Pacific island nation of Nauru and run by the Gover ...

, funded by Australia. The most recent 2022-23 Nauru Budget recognized expected revenues of $252.5 million and expenditure of $251.9 million (20% increase from Budget 2021-2022) with a $549,000 surplus balance. The surplus will be used to build up cash reserves at the bank and support Nauru to manage the uncertainties in the year ahead.

Balance of payments

Phosphate is Nauru's only export product, although the government also receives relatively significant foreign exchange income from licensing its rich skipjack tuna fishing grounds to foreign fishing vessels, which land an annual average of 50,000 tonnes of Nauru zone-caught tuna overseas. In 2004 income from phosphate export was US$640,000, with Australia, New Zealand and Japan serving as the country's major export markets. In the same year the Nauru government budget shows that income from licensing foreign fishing vessels was over US$3,000,000. Nauru needs to import almost all basic and capital goods, including food, water, fuel, and manufactured goods, with Australia and New Zealand as its major import sources. In 2004 Nauru's imports totaled about US$19.8 million.

Finance

Nauru has been a cash economy since at least 2004, after the Bank of Nauru and the Republic of Nauru Finance Corporation went bankrupt and ceased operations in the early 2000s and the licenses of all offshore banks were revoked by the Nauru government in 2004. Nauru uses the Australian dollar for its currency. Most government payments are executed through electronic funds transfer. Electronic funds transfer at point of sale was introduced in 2020. The government is required to periodically fly in Australian currency to maintain liquidity. On 2 June 2015, an agency of Bendigo and Adelaide Bank, Australia's fifth largest bank, was established in Nauru by the Department of Finance. Effective from the end of April 2016,

Westpac Westpac Banking Corporation, known simply as Westpac, is an Australian multinational banking and financial services company headquartered at Westpac Place in Sydney, New South Wales. Established in 1817 as the Bank of New South Wales, ...

, one of Australia's largest banks, ceased having any dealings with the Nauru government. On 21 April 2016, it was announced that the Bendigo Bank was facing pressure to also close its operation in Nauru. As of September 2020, the agency of Bendigo and Adelaide Bank continued to operate in Nauru.

Taxation

On October 1, 2014, an

income tax An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Ta ...

was imposed in Nauru for the first time, with high income earners paying a flat rate of 10%. The government spending in 2015 was forecast to be under US$92 million. Taxes include an airport

departure tax A departure tax is a fee charged (under various names) by a country when a person is leaving the country. Background Some countries charge a departure tax only when a person is leaving by air. In these cases, the departure tax can be ''de fa ...

and a bed tax at the Meneñ Hotel. The 2007–08 Budget saw the increase of existing excises on cigarettes and duty on imports. A tax on sugary foods was also introduced, chiefly to help combat Nauru's diabetes epidemic.

Tax haven status

Historically Nauru was regarded as a tax haven due to the operation of its international financial centre, which offered amongst other things offshore banking services. In 2001, Nauru was blacklisted internationally over concerns it had become a haven for

money laundering Money laundering is the process of concealing the origin of money, obtained from illicit activities such as drug trafficking, corruption, embezzlement or gambling, by converting it into a legitimate source. It is a crime in many jurisdicti ...

. Amendments made in 2004 abolished Nauru's Offshore Banking sector and, as recognised in Nauru's latest anti money laundering and countering the financing of terrorism (AML/CFT) review, Nauru's offshore sector is now limited to a small

offshore company The term "offshore company" or “offshore corporation” is used in at least two distinct and different ways. An offshore company may be a reference to: * a company, group or sometimes a division thereof, which engages in offshoring business pr ...

register. In July 2017 the Organisation for Economic Co-operation and Development (OECD) upgraded its rating of Nauru's standards of tax transparency. Nauru had been listed alongside fourteen other countries that had failed to show that they could comply with international tax transparency standards and regulations. The OECD subsequently put Nauru through a fast-tracked compliance process and the country was given a "largely compliant" rating.

Relationship with Australia

Currently, Nauru is heavily dependent on Australia as its major source of financial support. In 2001 Nauru signed an agreement with Australia to accommodate

asylum seeker An asylum seeker is a person who leaves their country of residence, enters another country and applies for asylum (i.e., international protection) in that other country. An asylum seeker is an immigrant who has been forcibly displaced and m ...

s (mostly from Iraq and Afghanistan) on the island, in return for millions of dollars in aid. This agreement, referred to as the "

Pacific Solution Pacific Solution is the name given to the Government of Australia policy of transporting asylum seekers to detention centres on island nations in the Pacific Ocean, rather than allowing them to land on the Australian mainland. Initially impl ...

", came to an end in 2007, prompting Nauruan concerns about the future of the island's revenue. Australia has also sent financial experts to Nauru to help the tiny nation overcome its economic problems. However, serious questions remain about the long-term viability of Nauru's economy, with uncertainties about the rehabilitation of mined land and the replacement of income from phosphates. In 2008, talks began between Australia and Nauru regarding the future of the former's economic development aid to the latter. Nauruan Foreign and Finance Minister Dr.

Kieren Keke Kieren Aedogan Ankwong Keke (born 27 June 1971) is a Nauruan politician and medical doctor. He is a member of the Parliament of Nauru and former Minister of Finance and Minister of Foreign Affairs. Background He is currently a leading figure of ...

stated that his country did not want aid handouts. One possible solution currently being explored would be for Australia to assist Nauru in setting up a "boat repair industry" for regional fishing vessels.

Nauru detention centre

The Nauru detention centre was established by the Australian government, with Nauruan agreement, in 2001 to cater for up to 800 refugees and asylum seekers under Australia's

Pacific solution Pacific Solution is the name given to the Government of Australia policy of transporting asylum seekers to detention centres on island nations in the Pacific Ocean, rather than allowing them to land on the Australian mainland. Initially impl ...

. The centre is seen by Nauruans as an important source of employment opportunities, in addition to the pledge of A$20 million for development activities.

Economic statistics

GDP Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...

: purchasing power parity - US$60 million (2001 est.) * GDP per capita: purchasing power parity - US$5,000 (2001 est.) *

Inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduct ...

rate (consumer prices): -3.6% (1993) * Budget: revenues: US$23.4 million; expenditures: US$ million (1995/96) *

External debt A country's gross external debt (or foreign debt) is the liabilities that are owed to nonresidents by residents. The debtors can be governments, corporations or citizens. External debt may be denominated in domestic or foreign currency. It inclu ...

: US$33.3 million * Economic

aid In international relations, aid (also known as international aid, overseas aid, foreign aid, economic aid or foreign assistance) is – from the perspective of governments – a voluntary transfer of resources from one country to another. Ai ...

- receives around US$2.25 million from

(1996/97 est.) *

Currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general ...

Australian dollar The Australian dollar ( sign: $; code: AUD) is the currency of Australia, including its external territories: Christmas Island, Cocos (Keeling) Islands, and Norfolk Island. It is officially used as currency by three independent Pacific Isl ...

The

fiscal year A fiscal year (or financial year, or sometimes budget year) is used in government accounting, which varies between countries, and for budget purposes. It is also used for financial reporting by businesses and other organizations. Laws in many ...

runs from July 1 to June 30.

Employment

* Labour force are mainly employed in mining

phosphate In chemistry, a phosphate is an anion, salt, functional group or ester derived from a phosphoric acid. It most commonly means orthophosphate, a derivative of orthophosphoric acid . The phosphate or orthophosphate ion is derived from phosph ...

public administration Public Administration (a form of governance) or Public Policy and Administration (an academic discipline) is the implementation of public policy, administration of government establishment (public governance), management of non-profit est ...

by RONPhos,

education Education is a purposeful activity directed at achieving certain aims, such as transmitting knowledge or fostering skills and character traits. These aims may include the development of understanding, rationality, kindness, and honesty ...

and

transport Transport (in British English), or transportation (in American English), is the intentional movement of humans, animals, and goods from one location to another. Modes of transport include air, land ( rail and road), water, cable, pipelin ...

* In 2004, the

unemployment Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is people above a specified age (usually 15) not being in paid employment or self-employment but currently available for work during the refere ...

rate was close to 90%. In February 2008, foreign affairs minister Dr.

stated: "We have got a major unemployment crisis in front of us." By 2011, the unemployment rate had decreased to 23%. * Main industries are phosphate

mining Mining is the extraction of valuable minerals or other geological materials from the Earth, usually from an ore body, lode, vein, seam, reef, or placer deposit. The exploitation of these deposits for raw material is based on the economic ...

, offshore

banking A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Becau ...

, coconut products *

Electricity Electricity is the set of physical phenomena associated with the presence and motion of matter that has a property of electric charge. Electricity is related to magnetism, both being part of the phenomenon of electromagnetism, as describ ...

production (fossil fuels) and consumption are around 30 GWh (2000) *

Agriculture Agriculture or farming is the practice of cultivating plants and livestock. Agriculture was the key development in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that enabled people t ...

is not a major employer, coconuts are the main produce

Data

The following table shows the main economic indicators in 2004–2022 (with IMF staff estimates for 2019–2027). Inflation below 3% is in green.

Trade

Exports An export in international trade is a good produced in one country that is sold into another country or a service provided in one country for a national or resident of another country. The seller of such goods or the service provider is an ...

- valued at US$30 million (2018). Exporting; fish, calcium phosphates, low-voltage protection equipment, air conditioners, leather apparel. Major trading partners include

Thailand Thailand ( ), historically known as Siam () and officially the Kingdom of Thailand, is a country in Southeast Asia, located at the centre of the Indochinese Peninsula, spanning , with a population of almost 70 million. The country is b ...

34%,

16%,

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...

13%, and

South Korea South Korea, officially the Republic of Korea (ROK), is a country in East Asia, constituting the southern part of the Korean Peninsula and sharing a land border with North Korea. Its western border is formed by the Yellow Sea, while its eas ...

10%. *

Imports An import is the receiving country in an export from the sending country. Importation and exportation are the defining financial transactions of international trade. In international trade, the importation and exportation of goods are limited ...

- valued at US$90 million (2018). Importing; refined petroleum, construction vehicles, tug boats, poultry meats, cars. Major partners are Taiwan 52%, and

28%.

References

External links

"Nauru seeks to regain lost fortunes"
Nick Squires,

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...