IMF Staff Completes 2026 Article IV Mission to the Federated States of Micronesia

IMF News, January 30, 2026

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Canonical URL: IMF Staff Completes 2026 Article IV Mission to the Federated States of Micronesia

IMF team led by Dinar Prihardini conducted discussions for the 2026 Article IV consultation with the Federated States of Micronesia (FSM) from January 15 to 28.
Press Release No. 26/028; publication date: January 30, 2026.
IMF Communications Department; MEDIA RELATIONS PRESS OFFICER: Pemba Sherpa. Phone: +1 202 623-7100 Email: MEDIA@IMF.org

Growth:
- FY2024 growth estimated at 2.3 percent, driven by strong fishing output, high bank profitability and an increase in public sector wages.
- FY2025 growth moderated to 1.1 percent as effects of higher fishing output and public sector wage increases dissipated and commencement of new infrastructure projects were delayed.
- FY2026 growth expected to remain steady at 1 percent of GDP, supported by a gradual pickup in Compact-funded public investment.
Inflation:
- Inflation slowed to 3.5 percent as global commodity prices moderate and US inflation gradually eases.
Fiscal and external:
- The fiscal surplus narrowed as revenues normalized following windfall gains and states increased expenditure in response to the higher revenue envelope from a greater share of fishing fees.
- Public debt declined to 9.6 percent of GDP in FY2025.
- The assets of the Compact of Free Association with the United States (Compact) and FSM trust funds reached a combined total of 508 percent of GDP.

Downside growth risks:
- Delays in implementing large infrastructure projects would hurt growth prospects and intensify emigration pressures.
- Slow implementation of infrastructure projects, amidst intensifying climate change, would depress growth, exacerbating emigration and skills shortages, leading to a negative feedback loop.
Fiscal risks:
- Financially weak state-owned enterprises.
- Costs associated with addressing oil spills from WWII-era shipwrecks.
Structural fragility:
- Fragility driven by remoteness, dispersed population, high vulnerability to climate change and governance challenges.
- Service quality impacted by aging infrastructure and wide disparities, particularly in outer islands and for low-income households.

Near-term priorities:
- Expedite climate-resilient public investment and improve project quality, with the support of development partners.
- Build consensus across stakeholders to reignite reforms that would support a vibrant private sector.
Financing approach:
- A mix of grants, concessional loans, and domestic revenue mobilization can help finance investments while preserving fiscal buffers and safeguarding debt sustainability.
Structural and regulatory reforms:
- Streamline and harmonize laws and regulations across states, particularly those related to foreign direct investment and business regulations.
- Enable the productive use of land while protecting customary ownership rights.
- Leverage digital banking and fiscal reforms to ease constraints on the demand and supply of credit.
- Address skills mismatches to help create high-quality jobs and stem emigration.
Data and statistics:
- Continue efforts to close data gaps and improve the availability and timeliness of economic statistics to support policy formulation.

The renewal of the Compact, with a significant step up in grants, provides an opportunity to reset the FSM’s economic trajectory, provided it is accompanied by reforms.
IMF staff thanked the authorities and counterparts in public enterprises, the private sector, and development partners for valuable dialogue and warm hospitality, and look forward to continuing close engagement with the FSM.

IMF Communications Department. "IMF Staff Completes 2026 Article IV Mission to the Federated States of Micronesia", January 30, 2026.