Press Release No. 09/58

Press Release: Statement of an IMF Staff Mission at the Conclusion of the 2009 Article IV Discussions with Kiribati

March 4, 2009

The following statement was issued in Tarawa today after the conclusion of an International Monetary Fund (IMF) staff mission to Kiribati:

"An IMF mission led by Mr. Yougesh Khatri, Senior Economist in the Asia and Pacific Department, completed their visit to Tarawa today for the 2009 Article IV Consultation discussions. The team had many useful discussions with the government and other key stakeholders on the economic outlook, policy priorities, and progress in implementing the government's economic agenda. Based on these discussions the team will prepare a staff report, scheduled to be presented to the IMF's Executive Board in early May.

"Economic activity has picked up significantly in 2008 with growth reaching 3½ percent, due in part to growth in agriculture. Inflation increased to 19 percent, however, on higher world prices for rice and the depreciation of the Australian dollar. The fiscal deficit improved in 2008—reflecting mainly higher-than-expected revenue from fishing licenses—but remains high (13 percent of GDP). As a result, A$ 25 million was withdrawn from the Revenue Equalization Reserve Fund (RERF), the principal source of budget financing. With the large drawdowns in recent years, and the global decline in asset values, the RERF has declined substantially in real per capita terms.

"Discussions focused on the impacts of the global financial crisis, measures to improve the government's fiscal position, and support for private sector growth. The main impact from the global financial crisis has been, so far, through global assets price declines and the depreciation of the Australian dollar. Against this background, near-term growth prospects have deteriorated and vulnerabilities have increased. A positive medium-term outlook for Kiribati could be best secured through forceful reform implementation. In this regard, the mission supports the government's recent progress with reforms, including recent tax and custom administration developments, in addition to the planned start of public enterprise reform this year. The mission welcomed this pivotal undertaking and urged the authorities to forge ahead.

"The mission thanks the authorities for constructive discussions and wishes them success in their endeavors."