IMF predicts fiscal crises if no action taken in Marshall Islands

An International Monetary Fund report has put the spotlight on a looming fiscal crisis in the Marshall Islands.

It says the Marshall Islands' social security programme is approaching bankruptcy and subsidies to state-owned enterprises are draining government funds.

The report says the government needs to put more money into the trust fund established by the Compact of Free Association with the United States, which will be critical when a US funding package expires in 2023.

Our correspondent Giff Johnson says the warning signs have been there for several years but no government has been bold enough to take the steps needed.

"If we don't make some of these adjustments in the short term, in the long term we'll just have no retirement fund so it's a difficult pill to swallow but it'll be a lot harsher a few years from now and that's one of the points that the IMF report points out."

Giff Johnson says if nothing changes it is predicted that the retirement fund will be bankrupt in eight years.

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