Photo: Ellinoora Markkanen.
The World Bank announced Tuesday this week that it has approved an additional $9 million in financing to help the Marshall Islands respond to sharply higher energy costs that are placing pressure on families, businesses, public services, and the national budget.
The assistance provides immediate budget support through an existing Marshall Islands Development Policy Operation. The original $21 million operation was approved in July 2024 to support stronger fiscal management and disaster and climate resilience.
The World Bank in a release this week said the additional financing brings total World Bank support under the operation to $30 million, of which $12 million in contingent financing remains available in the event of an eligible catastrophe.
“This support comes at an important time for Marshall Islands as we work to protect our people from rising costs and maintain essential services,” said Minister of Finance, David Paul. “We are committed to managing this crisis responsibly while continuing our work toward stronger public finances, greater energy security, and long-term resilience.”
The Finance Minister said new $9 million is “budget support” for the RMI and its use will be determined by the Cabinet. He said the RMI Constitution requires that all government revenue, including so-called “unanticipated revenue” such as this World Bank grant of $9 million, be appropriated by act of Nitijela. He told the Journal this unanticipated revenue will be reflected in the fiscal year 2027 national budget that Nitijela adopts later this year.
Marshall Islands has one of the world’s most fuel-import-dependent economies. With a heavy reliance on imported energy, food, and essential goods, the country has been hit by disruptions in global energy markets, the World Bank said.
“Fuel costs have tripled, the fuel import bill has increased by around $40 million, equivalent to 11.5 percent of gross domestic product, and growth in FY2026 is now expected to slow from a pre-crisis baseline of 4.1 percent to 2.0 percent,” the World Bank said, adding that: “Inflation is projected to reach 8.6 percent this fiscal year.”
Higher fuel costs are being felt across the economy. Fishing activity, the country’s largest source of export earnings and government revenue, is expected to decline. Families are facing higher prices for electricity, food, and transport, with outer-island communities particularly exposed because they depend on sea freight for essential supplies.
Gasoline prices at the pump rose nearly 30 percent from February to April, before declining slightly at the end of May. This had a cascading impact on taxi drivers who raised fares downtown by 50 percent in the face of fuel prices skyrocketing. The power company raised rates over 20 percent in May.
“This crisis is placing real pressure on families, services, and the national budget,” said Omar Lyasse, World Bank Resident Representative for the North Pacific. “This support gives the government critical breathing room while continuing the reforms needed to build a stronger, more resilient economy.”
The RMI Cabinet declared a State of Economic Emergency on March 26 and has taken steps to cushion households, stabilize essential services, and contain fiscal pressures.
“The World Bank’s additional financing will help support this response while preserving progress on reforms to strengthen public financial management, disaster preparedness, and climate resilience,” the Bank said.
The World Bank is also supporting Marshall Islands’ longer-term energy transition through the Renewable Energy Generation and Access Increase Project, which aims to reduce the country’s dependence on imported diesel. This is a large, multi-million grant to the Marshalls Energy Company that is focused heavily on installing grid-connected solar panels around Majuro to reduce pressure on the power plant and costs of imported diesel fuel.
Preparation of the World Bank’s supplemental financing for the RMI was supported by the Africa Caribbean Pacific-European Union Disaster Risk Management Program, managed by the Global Facility for Disaster Reduction and Recovery.