MANILA, PHILIPPINES - The Asian Development Bank (ADB) and the Government of Tuvalu have entered into a new Country Partnership Strategy (CPS) that will support budget management and good governance.

"ADB remains committed to improving public finance management and accountability in Tuvalu, in line with the government's national development strategy," said S. Hafeez Rahman, Director General of ADB's Pacific Department. Government expenditure is the main driver of economic activity in Tuvalu.

A Country Partnership Strategy is ADB's primary planning instrument for member countries that also serves to monitor and evaluate the country's development performance during the timeframe of the strategy.

ADB will provide a program grant and long-term technical assistance in support of a public financial management reform process to improve fiscal planning and the performance of public entities. ADB's assistance will complement that of other development partners to achieve improvements in primary education and basic health care services. Better fiscal management is essential for improved health and education outcomes.

Tuvalu's economy has been adversely affected by high fuel and food prices, pushing up inflation and electricity and transport costs - threatening the pace of future economic growth and the delivery of social services, particularly to outer islands.

The financing envelope is expected to be $5.85 million which will be provided in the form of program grants. The CPS will also include assistance of about $300,000 per year to help develop and implement capacity development to support public financial management process, review tariff arrangements for public enterprises - especially in the telecommunications and electricity sectors, and support to the National Bank of Tuvalu to operate on sound commercial principles.

ADB will also explore opportunities to work with development partners on climate mitigation and adaptation, as Tuvalu is extremely vulnerable to climate change. Support in this area will be through regional programs. Apart from the threat of rising sea levels, its low-lying atolls face occasional storm surges.

Tuvalu has received $7.82 million in loans and $4.79 million in technical assistance since joining ADB in 1993.