A new World Bank Group strategy for small states: Putting jobs at the center

By Gallina Andronova Vincelette and John Briceño

Small States face a unique and often underestimated set of economic challenges. Their size, geography, and exposure to external forces mean that shocks—whether climate-related, economic, or geopolitical—can have disproportionately large and lasting effects. For small businesses, a single hurricane, a sudden surge in imported fuel prices, or a downturn in tourism can undo months of investment and income in a matter of days.

When Hurricane Melissa struck Jamaica as a Category 5 storm in October 2025—one of the strongest hurricanes on record—roads were blocked, ports closed, and tourism bookings disappeared overnight. Businesses were forced to shut their doors, and jobs and incomes across multiple sectors were suddenly at risk. What is often labelled as “high risk” in small states reflects structural exposure to forces largely beyond their control.

Small states face a combination of constraints—geographic isolation, small populations, reliance on imports, and narrow economic bases—that limit production, reduce economies of scale, and raise the cost of doing business. These challenges are frequently compounded by recurrent shocks, from climate disasters to external demand volatility, which constrain private investment and slow the creation of sustainable jobs. Yet vulnerability is not destiny. With focused support, tailored solutions, and efficient delivery, these constraints can be mitigated and transformed into opportunities for growth and employment.

Decades of engagement with small states—including through the Small States Forum, currently chaired by the Government of Belize—have reinforced a central lesson: a one-size-fits-all development model does not work. The World Bank Group’s new Small States Strategy responds to this reality. It is built around three mutually reinforcing principles—selectivity, differentiation, and efficiency—all in service of a single objective: sustainable job creation.

Selectivity: Doing fewer things better

The first principle, selectivity, focuses support on six priority “Lighthouse Initiatives”: health, connectivity, energy, resilient infrastructure, fiscal sustainability, and support for micro, small, and medium enterprises (MSMEs). These areas offer the greatest potential to unlock private investment, strengthen businesses, and expand employment opportunities across small states.

Creating more and better jobs starts with clear diagnostics. A new series of Country Growth and Jobs Reports identifies the most binding constraints to private-sector–led hiring in each country. Tonga piloted this approach, with similar work now underway in Barbados, Guinea-Bissau, Lesotho, Mauritius, Samoa, and Seychelles. By putting jobs at the center and focusing on the highest-impact levers, these diagnostics help governments and partners move more quickly from insight to action.

Health provides a clear example of selectivity in practice. In the Pacific, rather than duplicating high-cost tertiary health systems across multiple small island states, Fiji is being developed as a regional medical hub. Kiribati, Tonga, and Tuvalu connect as spokes through improved telehealth platforms and cross-border referral systems. By investing selectively, regional tools, infrastructure, and training can be built once and shared across countries, reducing costs while expanding access and employment in health services.

Differentiation: Tailoring solutions to context

Small states are highly diverse in their constraints, capacities, and opportunities. What drives job creation in a larger coastal economy differs markedly from what works in a remote micro-state. Differentiation is therefore essential. The strategy adjusts support to country-specific circumstances, ensuring that interventions align with local realities and comparative advantages.

In Belize, a low-lying coastal small island developing state, the Blue Cities and Beyond program demonstrates this approach. By strengthening coastal management, improving water supply, and reducing pollution that threatens fisheries and reefs, the program helps protect a blue economy that generates more than USD1 billion annually and supports jobs across tourism, fishing, and marine industries.

Differentiation also means unlocking private finance where commercial capital rarely flows. In many small states, businesses are perceived as too risky by local banks, and international investors invest cautiously. In Botswana, a landlocked developing country, IFC helped address this challenge by developing the country’s first utility-scale solar project without a sovereign guarantee. The project brought a domestic bank into the transaction through dual-currency financing and mobilized US$80 million in investments. The World Bank is, in parallel, financing the strengthening of the grid and the first utility-scale battery storage system, to enable the integration of solar projects into the grid. The result is not only a solar plant, but a replicable model for how unlocking private finance can open markets and create jobs.

Efficiency and delivery at scale

Selectivity and differentiation ultimately support a shared objective: achieving greater efficiency and delivery at scale. Efficiency means moving faster, reducing fragmentation, and ensuring that every dollar delivers maximum impact—particularly in moments of crisis.

In the past year alone, the World Bank Group approved a record USD 3.3 billion in new commitments and guarantees for small states. Instruments such as the Crisis Preparedness and Response Toolkit enabled rapid assistance in Vanuatu, Grenada, and St Vincent and the Grenadines, helping governments protect businesses and jobs during the critical period after a shock before temporary disruptions became permanent losses. By directing financing strategically, the strategy aims to crowd in private investment that might otherwise bypass small states, multiplying its impact where it is needed most.

Small states cannot change their size or geography. But they can build economies that generate jobs, provide income and dignity, and strengthen resilience against future shocks. Implementation of the Small States Strategy is already underway through WBG Country Partnership Frameworks and in close collaboration with governments and partners. For small business owners across small states, effective execution of this strategy can translate into more stable livelihoods, stronger opportunities, and a more resilient economic future.

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