Occupation of the islands is believed to have occurred around 3,500 years ago with peoples from the Solomon Islands and Papua New Guinea arriving by canoe. During the 18^th and 19^th centuries, both British and French settlers made their home on the islands. Traders, missionaries and slave traders made a steady stream of visitors bringing with them European diseases that were unknown in the local peoples and for which they had little resistance. Added to this, slave traders kidnapped workers to be sent abroad to work on sugar plantations in Australia and Fiji. In earlier times prior to European contact, it is believed that the population was around 1,000,000. By 1935, it was reduced to 45,000.

The French and the British settlers with their intertwined economic interests both lobbied their respective governments to annex the region. In 1887, a unique arrangement was eventually drawn up where both nations agreed to jointly administer the region. However, local Melanesian peoples were significantly disadvantaged. This situation continued until 1980, when the nation declared independence, naming itself The Republic of Vanuatu and adopting its own constitution.

Having declared itself a tax haven in 1971, the banking sector attracted many dubious customers and the critical attention of the OECD. Under pressure, banking regulation was introduced in the 1990’s, causing a reduction from over 100 banks to 7 by 2003. In the period since 2000, a Comprehensive Reform Programme (CRP) has been adopted to improve the economic fortunes of the nation, with only limited success.