The country graduated to the category of “high income” on July 10, the Ministry of Finance and Economic Management said.
Cook Islands is still eligible for foreign development aid through to January 1, 2020.
But even after that, experts say some of our biggest aid donors – New Zealand, China and India – have committed to continued support.
Financial secretary Garth Henderson said the graduation was a significant achievement as the Cook Islands became the first Pacific Island to achieve this status.
Henderson said it was an important milestone in the country’s development, and served as evidence of effective government strategies, fiscal discipline and good governance.
However the new status brought a new set of challenges, especially with the loss of foreign aid that was used to improve infrastructure and resilience to climate change in the country.
Government economist Natalie Cooke projected the impact would be “minimal”.
New Zealand, which provides about two-thirds of the total Official Development Assistance, and other donor countries such as China and India, are expected to continue supporting the Cook Islands.
“We expect that the financial impacts of graduation will be minimal, and as such we are not looking for ‘replacement’ aid money. In saying that, we will still be working closely with our development partners going forward,” Cooke said.
Following notification of potential graduation in 2016, the Cook Islands government requested an extension on the decision in order to develop the appropriate statistical data and eliminate the possibility of the country’s premature graduation.
The National Statistics Office, with assistance of partners, refined the existing data and developed previously unavailable data on Gross National Income – the standard measure for determining economic development.
Henderson said the revised data indicated that the Cook Islands’ Gross National Income per capita was well above the threshold set by the Organisation for Economic Cooperation and Development in each of the years from 2015-2017.
This served as a signal to donor countries that the economy was strong enough to allow for financial independence and self-sustainability.
Henderson also said the Organisation for Economic Cooperation and Development had recently amended their rules to allow a country to re-enter the list of Official Development Assistance-eligible nations in the case of Gross National Income falling below the eligibility threshold.
Henderson said in preparation for the graduation the government had shifted its focus to ensure that it can be self-reliant by rationalising expenditure, while having access to the necessary skills to deliver public services effectively.
“As it stands, the Cook Islands is well equipped to take on the status of ‘high income country’ and will continue to overcome new and unique challenges on the path to further economic growth and prosperity.”