## IMF Staff Completes 2021 Virtual Staff Visit to Kiribati

_IMF News, December 20, 2021_

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## Bibliographic details
- Published: December 20, 2021

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### Mission and scope
- 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.

### Economic outlook and recent developments
- 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.

### Fiscal policy findings and recommendations
- 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.

### Structural reforms and governance
- 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.

### Next steps and engagement
- 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*

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## References

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_Source: https://www.imf.org/en/news/articles/2021/12/20/pr388-imf-staff-completes-2021-virtual-staff-visit-to-kiribati_