Vanuatu's Finance Minister says the government's recurrent budget could be hit hard by rising interest rates if the country graduates to developing country status at the United Nations.
A government delegation has returned from New York where it presented its case before the UN Committee for Economic and Social Commission, or ECOSOC, to continue with Least Developed Country status.
Vanuatu's Finance Minister Sela Molisa says he disputed some recent findings in a report recommending Vanuatu meets the criteria for graduation at the next ECOSOC meeting in May.
LDC status gives Vanuatu various privileges like market access for exports as well as special treatment in areas including trade and foreign aid.
Mr Molisa says graduating to developing country status could mean Vanuatu loses special interest rates on loans.
"Which at the moment, as an LDC, the maximum interest rate at the moment is one percent a year. Now if we graduate, it is possible the interest rate will increase to around five or six percent. Now what I'm going to do is formally ask especially the World Bank and the Asian Development Bank to state their position in that respect."