Economy of Nauru - Economic Performance

Economic Performance

In the years after independence in 1968, Nauru possessed the highest GDP per capital in the world due to its rich phosphate deposits. In anticipation of the exhaustion of its phosphate deposits, substantial amounts of the income from phosphates were invested in trust funds aimed to help cushion the transition and provide for Nauru’s economic future. However, because of heavy spending from the trust funds, including some wasteful foreign investment activities, the government is now facing virtual bankruptcy. To cut costs the government has called for a freeze on wages, a reduction of over-staffed public service departments, privatization of numerous government agencies, and closure of some overseas consulates. Economic uncertainty caused by financial mismanagement and corruption, combined with shortages of basic goods, has resulted in some domestic unrest. In 2004 Nauru was faced with chaos amid political strife and the collapse of the island’s telecommunications system. Moreover, the deterioration of housing and hospitals has continued.

Few comprehensive statistics on the Nauru economy exist, with estimates of Nauru's GDP varying widely. According to the U.S. State Department, Nauru’s GDP volume was US$1 million in 2004. Nauru receives about US$20 million foreign aid a year from Australia.