IMF Staff Completes 2025 Article IV Consultation to Kiribati
IMF News, May 27, 2025
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- Published: May 27, 2025
Mission and context
- An IMF team, led by Ms. Natalija Novta, visited Tarawa, Kiribati for the 2025 Article IV Consultation during April 21-30, 2025, and concluded virtually on May 19, 2025.
- Discussions covered recent developments, the economic outlook, and policy priorities.
- End-of-mission statement conveys preliminary findings of IMF staff; a staff report will be prepared and, subject to management approval, presented to the IMF's Executive Board.
Economic performance and outlook
- The Kiribati economy has recovered post-COVID and continues to grow steadily despite repeated shocks.
- Real GDP growth:
- 2024: grew by an estimated 5.3 percent.
- Projected 2025: 3.9 percent.
- Projected 2026: 3.2 percent.
- Inflation:
- 2024: 2.5 percent.
- Projected 2025: 7.8 percent (temporary, due to a one-off increase in fuel and electricity prices).
- Projected 2026: 3.5 percent.
- Current account:
- 2024: estimated to have remained in deficit at around 2 percent of GDP.
- Projected 2025: deficit projected at 2 percent of GDP, amid continued import demand and relatively subdued fishing revenues.
- Fiscal balance:
- 2024: fiscal policy was expansionary and the fiscal deficit was 22 percent of GDP.
- 2025: fiscal deficit expected to narrow to 15 percent of GDP, primarily due to the freeze on nominal wages and streamlining of subsidies, with withdrawals from the Revenue Equalization and Reserve Fund (RERF) recorded as a financing item.
Risks to the outlook
- Risks are tilted to the downside and include:
- Lower-than-budgeted RERF withdrawals if financial market volatility leads to low RERF returns.
- Disruptions to global trade due to escalating tariffs.
- Greater commodity price volatility.
- Potential decline in international aid.
- Climate-related natural disasters.
Policy recommendations and priorities
- Fiscal policy
- Use well-calibrated countercyclical fiscal policy to address increased risks.
- Calibrate fiscal policy to counter volatility from fishing revenues and grants to support macroeconomic stability.
- Integrate RERF withdrawals and deposits into a more developed medium-term fiscal framework, with larger withdrawals when fishing revenues and grants fall below expectations.
- Amend the RERF withdrawal rule to a balance-based rule to allow withdrawals when annual returns are low while preserving RERF’s long-term value.
- Maintain debt sustainability through gradual fiscal consolidation based on increased revenues, streamlined subsidies, and greater spending efficiency.
- Public financial management and debt
- Strengthen public financial management to increase the efficiency of public spending and investment (develop medium-term expenditure and investment framework, improve cash management, enhance internal and external audits).
- Establish a sound debt management framework and develop capacity to analyze new borrowing and assess sources of risk.
- Structural and institutional reforms
- Build infrastructure resilient to natural disasters, enhance connectivity, and support private sector development.
- Build capacity to analyze new borrowing to meet development and climate adaptation goals while maintaining debt sustainability.
- Continue efforts to build monetary and financial regulatory and supervisory institutions and enhance financial inclusion.
- Raise human capital by enhancing education and health services to support continued growth and private sector development.
- Improve the quality and timeliness of statistics to support policy design.
- Build revenue administration capacity and improve tax compliance.
Rationale and long-term priorities
- Kiribati’s remoteness, exposure to floods, scarce freshwater, and limited and infertile soil contribute to reliance on volatile fishing license revenues and international aid and low resilience to shocks.
- Addressing these structural vulnerabilities requires a multi-pronged approach combining resilient infrastructure, calibrated fiscal policy that accounts for revenue volatility, and strengthened institutional capacity to increase public investment efficiency and raise human capital.
- Gradual fiscal consolidation and more efficient climate adaptation investment would create room for resilience-building amid gradually rising sea levels.
Press Release No. 25/161, May 27, 2025.