IMF Staff Completes 2021 Virtual Staff Visit to Kiribati

IMF News, December 20, 2021

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IMF team led by Ms. Sarwat Jahan held virtual staff-level discussions with the authorities in Kiribati during December 6–16, 2021.
Discussions covered recent developments, the economic outlook, and policy priorities ahead.
Statement reflects views of IMF staff and does not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.

Real GDP growth projected at 1.5 percent in 2021 following a contraction of 0.5 percent in 2020.
Real GDP growth projected at 2.4 percent in 2022 as the vaccination drive continues.
Strong fishing revenues and supportive fiscal policies boosted government and household financial balances in 2020–21.
Inflationary pressures appear to have risen substantially in 2021 due to a combination of supply disruptions and high domestic demand.
Inflationary pressures are expected to continue in 2022, partially due to the passthrough effect of higher energy prices.
Risks to the outlook are substantial and predominantly tilted to the downside, primarily stemming from COVID-19 developments potentially delaying the global recovery.
A swift vaccination of the eligible population is key to safeguard the nascent growth and reopen the borders.

During 2020-21, the authorities approved an economic relief package of about AUD 30 million (11.5 percent of 2020 GDP), partly financed by reallocating donor grants.
- The relief focused on health spending, unemployment benefits, financial aid for cargo deliveries, support for private firms and state-owned enterprises (SOEs), and repatriation of stranded nationals.
- With half of the allocated funds still undisbursed, the authorities have room to continue to cushion the economic impact of the pandemic, if needed.
Near-term fiscal policy guidance:
- Supportive fiscal measures should remain in place until the recovery is firmly underway.
- All pandemic related spending should be well-targeted and focused on the most vulnerable, with proper safeguards in place.
Medium-term fiscal guidance:
- Fiscal consolidation will be necessary once the recovery is on a firm footing, underpinned by both revenue and expenditure measures.
- Maintaining the wage and social spending increases of 2021 in the 2022 budget would result in continued fiscal deficit.
- The sustainability of these and other spending such as the copra subsidy will need to be reexamined.
- Fiscal discipline could be reinforced by:
- Adhering to the rules-based policy regarding withdrawals from the sovereign wealth fund.
- Strengthening the medium-term fiscal framework.
- Making explicit budget provisions for climate change adaptation for a greener post-COVID recovery.

Several new pieces of legislation have been passed to advance structural reforms in the financial sector, environment, and social protection.
Effective implementation of these reforms will support a sustainable, inclusive, and green recovery as envisioned in the recently approved Kiribati Development Plan 2020-2023.
Recommended actions on SOEs and natural resources:
- Strengthen the governance and oversight of SOEs, enhance their commercial mandate, and ensure timely publication of their audited reports.
- The authorities’ plans to reopen Phoenix Islands Protected Area (PIPA) to commercial fishing should be designed to ensure sustainability of fishing and preserve marine biodiversity.

IMF and authorities to continue dialogue during the Article IV Consultation in the first half of 2022.
IMF team expressed gratitude for productive discussions and engagement.

IMF Press Release No. 21/388, December 20, 2021