IMF Executive Board Concludes 2024 Article IV Consultation with Kiribati
IMF News, May 10, 2024
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- Published: May 10, 2024
Overview and recent developments
- The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Kiribati.
- The economy strengthened after the removal of all COVID-19 restrictions in the second half of 2022.
- Drivers of improved 2023 performance: resumption of infrastructure projects, improved weather conditions, supportive fiscal measures, and a recovery in international arrivals.
- Growth is estimated to have improved to 4.2 percent in 2023 from 3.9 percent in 2022.
- Inflation has decelerated from its recent peak, driven by the moderation of global commodity prices, improved supply-side conditions, and base effects.
- The current account is estimated to shift back to a surplus of 10.2 percent of GDP in 2023, buoyed by a resurgence in fishing license fees, a rise in remittances, and a decline in global commodity prices.
Outlook and key projections
- Real GDP growth is projected at 5.8 percent in 2024, primarily driven by higher consumption following a 38 percent increase in civil service wages.
- Headline inflation is projected to average 4.5 percent in 2024, largely driven by increased domestic demand.
- The current account is expected to remain in surplus over the medium term, but the surplus will remain below its historical average due to:
- An increase in imports required for domestic consumption and infrastructure projects.
- A gradual decline in fishing license fees as a percent of GDP.
- Risks to the outlook are tilted to the downside and include:
- An intensification of regional conflicts.
- Deepening geo-economic fragmentation.
- An abrupt global slowdown.
- Commodity price volatility.
- Higher demand-driven inflation.
- Climate change.
Executive Board assessment — main messages and policy advice
- Directors welcomed the strong economic recovery supported by fiscal policies and increased infrastructure investment.
- Key vulnerabilities: Kiribati is a small island economy vulnerable to global shocks and climate change.
- Policy priorities emphasized by Directors:
- Implement sound policy measures and structural reforms, supported by capacity development, to:
- Enhance private sector led growth.
- Promote fiscal and debt sustainability.
- Enhance inclusiveness and climate resilience.
- Fiscal consolidation is crucial for safeguarding fiscal and debt sustainability.
- Enhance revenue mobilization given uncertainties related to fishing revenue and external grants and substantial climate adaptation needs.
- Rationalize recurrent expenditure, including:
- Addressing the elevated public wage bill.
- Streamlining the copra subsidy.
- Improving the targeting and efficiency of social protection payments.
- Formulate a sustainable fiscal framework to promote fiscal discipline.
- Promptly reform the sovereign wealth fund withdrawal rule to help preserve the fund’s real value and facilitate budget planning.
- A few Directors saw merit in easing the withdrawal rule to allocate more resources toward infrastructure investment while preserving the value of the fund.
- Bolster institutional and administrative capacity and further enhance public financial management.
- Strengthen state owned enterprises’ governance and transparency, including enhancing their commercial mandate and financial viability.
- Step up structural reforms to address drivers of the economy’s fragility and foster development:
- Close the infrastructure gap and improve internet connectivity.
- Expand private sector employment and investment, upgrade exports, close human capital and gender gaps, and strengthen institutions and governance.
- Improve financial regulation and support financial inclusion, including prompt operationalization of the Kiribati Financial Supervisory Authority.
- Invest in adaptation and secure climate finance; bolster sustainable utilization of natural resources and finalize the Environment Act and the Fisheries Act.
Fiscal, reserves, and balance sheet highlights (selected)
- Per capita GDP (2022): US$2,199.
- Population (2022): 123,375.
- Life expectancy at birth (2020): 67.3.
- Poverty (2019):
- Below $2.15 a day: 1.7.
- Below the national poverty line: 21.9.
- Inequality (2019, income shares):
- Top 10 percent: 22.9.
- Bottom 20 percent: 9.5.
- IMF quota: SDR 11.2 million.
- Main export products: Frozen yellowfin tunas, crude coconut oil, self-propelled works trucks, petroleum oil, and copra.
Selected economic indicators, 2020–29 (highlights from table)
- Real GDP (percent change): 2020: -0.6; 2021: 8.5; 2022: 3.9; 2023 Est.: 4.2; 2024 Proj.: 5.8; 2025 Proj.: 4.1; 2026 Proj.: 3.3; 2027 Proj.: 2.5; 2028 Proj.: 2.1; 2029 Proj.: (value not listed).
- Consumer prices (percent change, average): 2020: 2.6; 2021: 5.3; 2022: 9.3; 2023 Est.: 4.5; 2024 Proj.: 3.0; 2025 Proj.: 2.0; 2026 Proj.: 1.9; 2027 Proj.: 1.8.
- Inflation (end of period): 2020: 2.8; 2021: 16.2; 2022: -2.1; 2023 Est.: 4.8.
- Central government finance (in percent of GDP), selected rows:
- Revenue and grants: 2020: 105; 2021: 72; 2022: 69; 2023 Est.: 101; 2024 Proj.: 103; 2025 Proj.: 92; 2026 Proj.: 82; 2027 Proj.: 91; 2028 Proj.: 88; 2029 Proj.: 87.
- Total domestic revenue: 2020: 75; 2021: 64; 2022: 56; 2023 Est.: 71; 2024 Proj.: 65; 2025 Proj.: 63; 2026 Proj.: 62.
- Of which: fishing revenue: 2020: 57; 2021: 44; 2022: 36; 2023 Est.: 51; 2024 Proj.: 46; 2025 Proj.: 43; 2026 Proj.: 42; 2027 Proj.: 41.
- External grants: 2020: 30; 2021: 8; 2022: 13; 2023 Est.: 39; 2024 Proj.: 29; 2025 Proj.: 19; 2026 Proj.: 28; 2027 Proj.: 26.
- Expenditures: 2020: 83; 2021: 102; 2022: 126; 2023 Est.: 107; 2024 Proj.: 95; 2025 Proj.: 104.
- Current expenditures: 2020: 67; 2021: 73; 2022: 70; 2023 Est.: 68.
- Development expenditures: 2020: 16; 2021: 21; 2022: 31; 2023 Est.: 53; 2024 Proj.: 35; 2025 Proj.: 25.
- Domestic recurrent balance 1/: 2020: -45; 2021: -47; 2022: -51; 2023 Est.: -54; 2024 Proj.: -53; 2025 Proj.: -50; 2026 Proj.: -49; 2027 Proj.: -48.
- Recurrent fiscal balance (incl. budget support grants): 2020: 14; 2021: -2; 2022: -7; 2023 Est.: -4; 2024 Proj.: -5; 2025 Proj.: -6.
- Overall balance 2/: 2020: 4; 2021: -11; 2022: -18; 2023 Est.: -1; 2024 Proj.: -22; 2025 Proj.: -15; 2026 Proj.: -13; 2027 Proj.: -14; 2028 Proj.: -16.
- Financing and reserves:
- Of which: Revenue Equalization Reserve Fund (RERF) flows and closing balances are presented in the table; RERF closing balance (in millions of A$): 2020: 1172; 2021: 1353; 2022: 1194; 2023 Est.: 1389; 2024 Proj.: 1414; 2025 Proj.: 1475; 2026 Proj.: 1529; 2027 Proj.: 1579; 2028 Proj.: 1642; 2029 Proj.: 1714.
- Per capita value (in 2006 A$): 2020: 7264; 2021: 8018; 2022: 6530; 2023 Est.: 7080; 2024 Proj.: 6835; 2025 Proj.: 6803; 2026 Proj.: 6772; 2027 Proj.: 6717; 2028 Proj.: 6710; 2029 Proj.: 6729.
- Cash reserve buffer 3/: values and closing balance percentages provided in the table; in excess of 3-months of current spending and LCDF (in millions of A$): 219; 144; 124; 108; 61; 40 (years not individually labeled in table excerpt).
- Balance of payments:
- Current account including official transfers (in millions of US$): 2020: 20.3; 2021: -6.5; 2022: 28.6; 2023 Est.: 30.2; 2024 Proj.: 30.4; 2025 Proj.: 29.2; 2026 Proj.: 29.4; 2027 Proj.: 30.5; 2028 Proj.: 31.3; 2029 Proj.: 31.8.
- Current account (percent of GDP): 2020: 7.0; 2021: -2.4; 2022: 10.2; 2023 Est.: 9.7; 2024 Proj.: 9.2; 2025 Proj.: 8.4; 2026 Proj.: 8.1; 2027 Proj.: 8.0; 2028 Proj.: 7.9.
- External debt (in millions of US$) 4/: 2020: 32; 2021: 78; 2022: 135.
- External debt service (in millions of US$): 2.3; 2.2; 2.7; 2.9 (table lists these values without year labels in excerpt).
- External debt service (In percent of exports of goods and services): 1.3; 1.0; 0.9; 0.8; 0.7 (table lists these values without year labels in excerpt).
- Memorandum items:
- Nominal GDP (in millions of A$): 2020: 324; 2021: 385; 2022: 390; 2023 Est.: 420; 2024 Proj.: 470; 2025 Proj.: 501; 2026 Proj.: 528; 2027 Proj.: 551; 2028 Proj.: 572; 2029 Proj.: 595.
- Nominal GDP (in millions of US$): 2020: 224; 2021: 271; 2022: 279; 2023 Est.: 311; 2024 Proj.: 329; 2025 Proj.: 342; 2026 Proj.: 354; 2027 Proj.: 366; 2028 Proj.: 382.
IMF Communications Department; Press Release No. 24/151; May 10, 2024.
