Political sketch
Formerly the Ellice Islands. Independent from the United Kingdom on 1 October 1978.
Tradition indicates that Samoa or Tonga was the original home of Tuvalu's first settlers. The Spanish explorer Alvaro de Mendaña de Neira sighted the island of Nui in 1568. The U.S. captain Arent De Peyster visited the island of Funafuti in 1819 and named the islands the Ellice Islands, after the British member of Parliament who owned his ship. In the 1860s, Peruvian slave traders captured most of the people of Funafuti and Nukulaelae islands, who never returned. The United States claimed the four southern islands in 1856. In 1892, Tuvalu joined the British Gilbert Islands Protectorate, which the British established partly from a desire to stop the slave trade. The protectorate became the Gilbert and Ellice Islands Colony in 1916. After Japanese forces occupied the Gilberts in December 1941, during the Second World War, U.S. forces took the Ellice Islands and used them as a base for retaking the Gilberts, which was accomplished in November 1943.
After the war, many Tuvaluans emigrated to the island of Tarawa in the Gilberts seeking jobs. Rivalry between them and Kiribatians set the stage for separation of the two. Tuvaluans voted overwhelmingly in 1974 for separation from the Gilberts (now Kiribati), whose people are Micronesian. Tuvalu became a separate dependency on 1 October 1975 and achieved independence from the United Kingdom on 1 October 1978. The country's name means "group of eight," referring to the eight traditionally inhabited islands. On 7 February 1979 the United States signed a treaty of friendship with Tuvalu and relinquished its claims to the four southern islands. The economy is based mainly on subsistence agriculture and fishing. The government is democratic.
Wars since 1500
Second World War in the Pacific, 1942-1945 (Japan against United Kingdom, United States, China, Australia, New Zealand, Netherlands, and allies) (Tuvalu was not invaded, but was used as a base).
Convertibility
The sterling area:
On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914 gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925 the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.
The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973 the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong had abandoned sterling as its anchor currency. The United Kingdom abolished exchange controls on 24 October 1979, ending the sterling area.
Australia:
Australia imposed an embargo on shipments of gold from 14 July 1915, after the First World War had begun, through 24 April 1925 (Australia, proclamation of 14 July 1915). Australia imposed exchange controls on 28 August 1939, shortly before as the Second World War began. In January 1976 Australians became free to buy and sell gold in Australia; previously, they had been required to sell it to the central bank within one month. Australia removed most exchange controls on 12 December 1983, in conjunction with a managed float of the Australian dollar (Australia, Treasurer's announcement of 9 December 1983). On 1 July 1990 Australia abolished regulations pertaining to the export of Australian notes and coins.
Australia left the sterling area on 23 June 1972.
The monetary area of Australia included Papua and New Guinea from the First World War until Papua New Guinea left it on 1 January 1976.
Other
Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): None.
Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): None.
Frankel and Rose (1996) list of currency crashes: Country not listed.
No exchange rate data in Reinhart and Rogoff (2003).
References
Primary sources:
--Laws and decrees:
Gilbert and Ellice Islands. Gazette. 1967-1979. Gilbert and Ellice Islands Colony Gazette (1967-1975); Gazette. Gilbert Islands (1975-1979). Suva, Fiji: T. Sanerive (1967-1975); Tarawa: Government Printer (1975-1979). (Successor to Great Britain, Western Pacific gazette; succeeded by Tuvalu gazette.)
Great Britain (United Kingdom). Gazette. 1665-present. Oxford Gazette (1996-1666); London Gazette (1666-present). Oxford (1665-1666); London (1666-present): His/Her Majesty's Stationery Office from 1903. Online at <http://www.gazettes.online.co.uk>; as of September 2005, gazettes since 1900 are available.
Great Britain (United Kingdom). Western Pacific gazette. 1916-1967. High Commission for Western Pacific Islands. Western Pacific High Commission Gazette. Suva, Fiji: High Commission for the West Pacific. (Covers present-day Kiribati, Solomon Islands, and Tuvalu. Succeeded by Gilbert and Ellice Islands gazette.)
Tuvalu. Gazette. Gilbert and Ellice Islands Colony Gazette (1968-1975); Tuvalu Gazette, G. N. [General Notices] (1975-present). Suva, Fiji : T. Sanerive (1968-1975); Funafuti: Tuvalu Government (1975-present).
--Publications of monetary authorities:
--Web site of the current monetary authority (viewed January 2005):
Commonwealth Bank of Australia. Annual report. 1912-1960. Aggregate Balance Sheet of the Commonwealth Bank of Australia (1912-1927); Balance Sheet of the Commonwealth Bank of Australia; and, Balance Sheet of the Commonwealth Savings Bank of Australia (1928-1941); Balance Sheet and Director's Report / Commonwealth Bank of Australia and Commonwealth Savings Bank of Australia (1942-1944); Report and Balance Sheets (1945-1959); Report and Financial Statements (1960). Sydney: Commonwealth Bank of Australia. (This report includes information about the Notes Issue Board during its existence from 1920-1924).
Commonwealth Bank of Australia. Bulletin. 1937-1959. Statistical Bulletin. Sydney: Commonwealth Bank of Australia.
Reserve Bank of Australia. Annual report. 1959/1960-present. Report and Financial Statements (1959/1960-1999); Annual Report (2000-present). Sydney: Reserve Bank of Australia.
Reserve Bank of Australia. Bulletin. 1960-present. Bulletin (1960-1981); Statistical Bulletin (1981-present). Sydney: Reserve Bank of Australia.
<http://www.rba.gov.au>
--Other publications or Web sites:
Gilbert and Ellice Islands Colony. ?-? Blue Book. Suva, Fiji.
Great Britain (United Kingdom). Report on the Gilbert and Ellice Islands. 1920-1939, 1947-1974? Colonial Office, Report for … (1919/1920-1929/1930); Colonial Office, Annual Report on the Social and Economic Progress of the People of the Gilbert and Ellice Islands Colony (1930/1931-1937); Colonial Office, Annual Report on the Gilbert and Ellice Islands Colony for the Year … (1947-1953); Colonial Office, Gilbert and Ellice Islands Colony and the Central and Southern Line Islands: Report for the Years … (1954 and 1955-1965); Commonwealth Office, Gilbert and Ellice Islands Colony and the Central and Southern Line Islands: Report for the Years … (1966/1967); Foreign and Commonwealth Office, Gilbert and Ellice Islands Colony and the Central and Southern Line Islands: Report for the Years … (1968-1974?). London: His / Her Majesty's Stationery Office. (This series was called Colonial Reports before the Second World War and Colonial Annual Reports afterwards; it was suspended during the war for most colonies.)
National Bank of Tuvalu. 1980?-present. Annual Report. Funafuti: National Bank of Tuvalu. (This bank is a commercial bank, not a central bank.)
Main secondary sources:
Asian Development Bank. 1998. Tuvalu: 1997 Economic Report. Manila: Office of Pacific Operations, Asian Development Bank.
IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.)
Monetary authorities: Tuvalu
| Dates | Type | Name | Source | Remarks |
| 1937
-present (2005) |
dollarization | Australian pound / Australian dollar from 14 February 1966 (issued by central bank [with commercial banking functions] Commonwealth Bank of Australia / by central bank Reserve Bank of Australia from 14 January 1960 [headquarters for both Sydney, Australia]) | Gilbert and Ellice Islands, Currency Ordinance, 1937, cited in Great Britain, report on the Gilbert and Ellice Islands, 1948: 13; Gilbert and Ellice Islands, Currency (Amendment) Ordinance, 1966, cited in Great Britain, report on the Gilbert and Ellice Islands, 1966-1967: 22 | Australian notes and Australian and British coins were legal tender. In December 1941, the acting resident commissioner of Ocean Island (Banaba) issued £5,000 of local paper money to make year-end payments after the beginning of the Second World War in the Pacific interrupted communications. The notes were retired on 28 February 1942 when Chinese and Europeans were evacuated from the island (Schwan and Boling 1995: 215). The first bank was the Commonwealth Bank of Australia (headquarters Sydney, Australia), which established an agency on Ocean Island (Banaba) sometime before the Second World War. Australian notes and Australian and British coins were legal tender. Tuvalu has apparently never had two commercial banks at once. Tuvalu issued its first coins in 1976. In late 1980, the government of Tuvalu and Barclays Bank (headquarters London, England) established the National Bank of Tuvalu (headquarters Funafuti, Funafuti, Tuvalu) as a joint venture. In 1985, Westpac Banking Corporation (headquarters Sydney, Australia) took over Barclays's interest, and in 1995 the |
Exchange rate arrangements: Tuvalu
| Dates | Official arrangement | Source | Unofficial arrangement, if different | Remarks |
| 1892
-1937 |
fixed; used pound sterling | inferred from Great Britain, report on the Gilbert and Ellice Islands, 1948: 13 | The British declared the Gilbert and the Ellice islands a protectorate in 1892 | |
| 1937
-13 February 1966 |
fixed; used Australian pound | Gilbert and Ellice Islands, Currency Ordinance, 1937, cited in Great Britain, report on the Gilbert and Ellice Islands, 1948: 13 | See the table for Australia on parallel market data for the Australian pound (later dollar). | Australian notes and Australian and British coins were legal tender. In December 1941, the acting resident commissioner of Ocean Island (Banaba) issued £5,000 of local paper money to make year-end payments after the beginning of the Second World War in the Pacific interrupted communications. The notes were retired on 28 February 1942 when Chinese and Europeans were evacuated from the island (Schwan and Boling 1995: 215). |
| 14 February 1966
-present (2005) |
fixed; uses Australian dollar | Reserve Bank of Australia annual report, 30 June 1966: 27; Gilbert and Ellice Islands, Currency (Amendment) Ordinance, 1966, cited in Great Britain, report on the Gilbert and Ellice Islands, 1966 and 1967: 22 | Australia introduced the decimalized Australian dollar to replace the Australian pound at Australian $2 = Australian £1. |