Marshall Islands receives additional aid from WB to address energy crisis

Majuro

By Pacific Island Times News Staff

Majuro—The World Bank has approved an additional $9 million in budget support for the Marshall Islands, increasing the total aid to $30 million to alleviate the impact of the looming global fuel crisis on the fragile Pacific island economy.

The Marshall Islands is currently under a state of economic emergency in the wake of the war in Iran, which has driven up fuel costs across the world, affecting local consumer prices.

President Hilda Heine has cut government hours, requiring public offices to close at 3 p.m. daily as part of a 90-day Emergency Electricity Savings Policy.

The World Bank assistance is channeled through an existing Marshall Islands Development Policy Operation.

The original $21 million operation was approved in July 2024 to support stronger fiscal management and disaster and climate resilience.

Of the total funding support, $12 million in contingent financing remains available in the event of an eligible catastrophe, according to a press release from the World Bank.

“This support comes at an important time for Marshall Islands as we work to protect our people from rising costs and maintain essential services,” said Marshall Islands Minister of Finance David Paul.

“We are committed to managing this crisis responsibly while continuing our work toward stronger public finances, greater energy security and long-term resilience," he added.

Marshall Islands is one of the world’s most fuel-import-dependent economies.

Fuel costs have tripled, the fuel import bill has increased by around $40 million, equivalent to 11.5 percent of GDP, and growth in FY26 is now expected to slow from a pre-crisis baseline of 4.1 percent to 2.0 percent. Inflation is projected to reach 8.6 percent this fiscal year.

As of May, pump prices in Majuro averaged $10 a gallon, while outer island communities paid as high as $20 per gallon.

Higher fuel costs are being felt across the economy. Fishing activity, the country’s largest source of export earnings and government revenue, is expected to decline.

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Families are facing higher prices for electricity, food, and transport, with outer-island communities particularly exposed because they depend on sea freight for essential supplies.

“This crisis is placing real pressure on families, services, and the national budget,” said Omar Lyasse, World Bank resident representative for the North Pacific. “This support gives the Government critical breathing room while continuing the reforms needed to build a stronger, more resilient economy.”

The World Bank said it is also supporting Marshall Islands’ longer-term energy transition through the Renewable Energy Generation and Access Increase Project, which aims to reduce the country’s dependence on imported diesel.

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