The International Monetary Fund warns that declining funding from the United States will make it increasing difficult for the Marshall Islands to sustain payroll costs of its government sector.
The IMF report released today says the government must quickly make some tough decisions for the long-term economic health of the country.
The IMF conducts an economic review of the Marshall Islands every two years.
It has urged the government to take speedy action to reform its operations to produce a budget surplus at the end of the current fiscal year.
This, it says, is to reverse last year's situation when the Marshall Islands ended the year with a more than 3.5 million US dollar deficit, or more than two percent of its national budget.
It has also asked the government to adjust budget priorities to increase contributions to a national trust fund to adequately capitalise the fund to replace U.S. grants that expire in 2023.