The Asian Development Bank says Vanuatu's current economic growth may be undermined by a twenty-five percent pay increase for public servants.
Vanuatu and other Melanesian countries Papua New Guinea and Solomon Islands have been praised for their economic growth in the ADB's latest Pacific economic outlook report.
However Fiji and Tonga have been singled out as two regional economies struggling as a result of civil difficulties.
But while Vanuatu's growth is benefitting from a surge in tourism and agriculture activity, the report's author says stronger growth is needed to generate employment for the growing population.
Craig Sugden warns that the government may have a problem with its public service.
"It's potentially set up a bit of a problem for the long-term by providing a twenty-five percent pay increase for civil servants. So this pay increase is going to put a lot of strain on the budget, notably on its ability to fund capital and goods and services so that the improvements that have been made recently may be slightly unwound over the long term as the government tries to fund this much higher wage bill."
Craig Sugden from the ADB