IMF wants Universal Basic Income dismantled in Marshall Islands

Would $200 per quarter tempt you out of the labour market ?

The Marshall Islands plans to give all its citizens $200 every three months out of a US trust fund. Cue IMF alarm.

The programme, which amounts to an exercise in Universal Basic Income (UBI), starts in the first quarter of 2026. Recipients can choose to get the money by cheque or bank transfer, or in cryptocurrency via a government digital wallet.

The Marshall Islands form a chain in the central Pacific Ocean. The US carried out 67 nuclear tests in the northern part of the chain between 1946 and 1958. The tests were accompanied by widespread forced displacement of the islanders and have had permanent or near-permanent environmental consequences. [1]

Today, the US still needs access to the islands for security reasons. It provides economic and financial assistance to the Marshall Islands in return for unlimited and exclusive access to its land and waterways for strategic aims.

In October 2023 the US renewed its relationship with the islands by setting up a Compact Trust Fund (CTF). By the end of 2024, the US had paid $200 million into the fund, drawdowns from which will be used to pay for the UBI.

The idea that all the citizens of the Marshall Islands have a moral claim to share in the fund does not seem to invite critique. Indeed, the purpose of the CTF is defined as providing the “sources of revenue to help meet needs of people in the Republic of the Marshall Islands”. [2]

The IMF feels the need for a critique anyway. The UBI programme should be replaced “at the first available and feasible opportunity” with a “more targeted scheme” to ensure “more effective uses of the CTF resources,” the IMF said in December. [3]

“Clear communication to frame the UBI as a basic income floor—not a substitute for employment— would also help manage expectations and preserve work incentives,” the IMF warns.

I don’t know how feasible it is to retire on $800 per year in the Marshall Islands but I will take a guess that it wouldn’t be a great experience. UBI seems a reasonable option given that it is simple for such a small state to administer, and establishes a direct connection between central government and informal workers on the most remote islands.

Means testing for the money, which the IMF prefers, would come at a higher administrative cost, as well as creating social stigma costs. It would also be very difficult for the government to explain why some people on the permanently irradiated islands merit compensation, while others do not.

The Marshall Islands government told the IMF that UBI is needed to help its people overcome a cost-of-living crisis, and to try and limit persistent outward migration. The islands have a population of only about 42,000.

The idea that any group of people should have an unconditional right to income is anathema to free-market ideology. The IMF presumably wants to try to prevent the project from being seen as a successful precedent for bigger UBI schemes elsewhere.

The islanders might be glad to have the chance to put some cash aside in case their country ever needs an IMF bailout. An examination of IMF structural adjustment programmes between 1980 and 2014 found that policy reforms mandated by the IMF had the overall effect of increasing inequality. [4]

IMF-backed fiscal consolidation, trade and financial liberalization, domestic financial sector reforms, and external debt steps all had negative impacts on the distribution of wealth.

These impacts were typically visible within a year of the IMF policies being adopted, and persisted into the medium term. Rather than seeking to unpick the Marshall Islands experiment before it has even started, the IMF would be better advised to spend more time considering the impacts of its own policies.

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[1] Benetick Kabua Maddison, The Ongoing Consequences of the U.S. Nuclear Testing Program on the Marshall Islands (2023). Direct Link: The Ongoing Consequences of the U.S. Nuclear Testing Program on the Marshall Islands | Heinrich Böll Stiftung

[2] See Compact Trust Fund Agreement between the US and the Marshall Islands (Direct link)

[3] Republic of Marshall Islands: 2025 Article IV Consultation-Press Release; Staff Report; and Statement by the Authorities of the Republic of Marshall Islands. Republic of Marshall Islands: 2025 Article IV Consultation-Press Release; Staff Report; and Statement by the Authorities of the Republic of Marshall Islands

[4] Timon Forster, Alexander E. Kentikelenis, Bernhard Reinsberg, Thomas H. Stubbs, Lawrence P. King, “How structural adjustment programs affect inequality: A disaggregated analysis of IMF conditionality, 1980–2014” (PDF) How structural adjustment programs affect inequality: A disaggregated analysis of IMF conditionality, 1980–2014