IMF Executive Board Concludes 2023 Article IV Consultation with Kiribati
IMF News, September 15, 2023
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- Published: September 15, 2023
Economic performance and outlook
- Real GDP grew 7.9 percent in 2021 after a contraction of 1.4 percent in 2020.
- Real GDP is estimated to have slowed to 1.2 percent in 2022 due to a domestic COVID‑19 outbreak, lockdown restrictions, and a severe drought affecting the agricultural sector.
- Removal of COVID‑19 restrictions and border reopening in August 2022 boosted growth.
- Real GDP growth is projected at 2.5 percent in 2023 as large infrastructure projects resume and weather conditions improve.
- In the medium term, real GDP growth is projected to converge to its historical average of 2 percent.
- Executive Directors assessed that risks to the outlook are mainly on the downside.
Inflation and external position
- Inflation averaged 5.3 percent in 2022, driven by a recovery in domestic demand, supply shortages, elevated commodity prices, and freight costs.
- Headline inflation is projected to increase to 8.6 percent in 2023 due to a low base in the first half of 2022 and delayed pass‑through of normalizing global commodity prices and freight costs.
- The current account is expected to swing from a surplus to a deficit of 4 percent of GDP in 2022 because of higher import prices and lower fishing revenues.
- The current account is expected to return to a surplus of 8 percent of GDP in 2023, though the surplus will remain below the historical average owing to increased imports for infrastructure projects.
- Kiribati’s external position is assessed to be broadly in line with the level implied by fundamentals and desirable policies.
Fiscal position and policy recommendations
- IMF staff and Executive Directors recommend fiscal consolidation to reduce fiscal risks stemming from volatile fishing revenues and dependence on donor grants.
- Policy recommendations include:
- Consolidating recurrent spending.
- Improving targeting and efficiency of the social safety net.
- Greater revenue mobilization.
- Development of a sustainable medium‑term fiscal framework that integrates rules‑based withdrawals from the Revenue Equalization Reserve Fund (RERF).
- Provisioning for climate change adaptation costs in the budget.
- Authorities’ ongoing public financial management reforms are commended and should continue, including:
- Timely implementation of the Integrated Financial and Management Information System (IFMIS) for budget execution.
- Strengthening cash flow management.
- Finalizing an updated Public Financial Management Act.
- Strengthening budget planning and publishing fiscal reports more regularly.
- Executing effective controls over cash balances and improving procurement controls.
State-owned enterprises and structural reforms
- It is essential to place SOEs on a commercial and sustainable footing to reduce fiscal pressures.
- Recommendations for SOEs include:
- Recalibrating SOE tariffs to improve financial viability while protecting the most vulnerable.
- Strengthening the SOE monitoring unit’s capacity to analyze and monitor SOE activities, risks, and performance.
- Ensuring SOEs improve financial management and publish audited financial statements in a timely manner.
- Continuing efforts to divest and outsource SOE activities.
- Phasing out SOE tax exemptions to level the playing field with the private sector.
- Structural reform recommendations to boost export competitiveness and private sector development:
- Reform the copra subsidy program.
- Improve connectivity through better air transport, ports, and shipping services.
- Boost the telecommunications network.
- Build a skilled workforce.
- Enhance access to finance.
Natural resource management and data/statistics
- Authorities should continue to better utilize natural resources:
- Build on approvals of the Environment Act and Fisheries Act by developing regulations and monitoring capacity for enforcement.
- Reopening the Phoenix Islands Protected Area (PIPA) to commercial fishing should be carefully designed with a fully developed marine spatial plan to ensure sustainability and preserve marine biodiversity.
- Continued efforts to build statistical capacity are encouraged to facilitate data‑based policy making:
- Strengthen institutional capacity to produce high‑quality national accounts, government finance statistics, and financial sector data in a timely manner.
- Implement the IMF’s Enhanced General Data Dissemination System (e‑GDDS) by publishing economic data on a National Summary Data Page.
Key statistics (Table 1 highlights, 2019–28 where shown)
- Real GDP (percent change):
- 2019: -2.1
- 2020: -1.4
- 2021: 7.9
- 2022 (Prel. Est.): 1.2
- 2023 (Proj.): 2.5
- 2024 (Proj.): 2.4
- 2025 (Proj.): 2.3
- 2026 (Proj.): 2.1
- Consumer prices (percent change, average):
- 2019: -1.8
- 2020: 2.6
- 2021: 5.3
- 2022 (Prel. Est.): 8.6
- 2023 (Proj.): 4.5
- 2024 (Proj.): 1.9
- 2025 (Proj.): 1.8
- Central government finance (percent of GDP):
- Revenue and grants: 2019: 147; 2020: 132; 2021: 100; 2022: 91; 2023: 102; 2024: 105; 2025: 104; 2026: 98; 2027: 97
- Total domestic revenue: 2019: 110; 2020: 94; 2021: 81; 2022: 67; 2023: 70; 2024: 71; 2025: 72; 2026: 74; 2027: 73
- Of which: fishing revenue: 2019: 90; 2020: 56; 2021: 44; 2022: 45; 2023: 47; 2024: 49; 2025: 48
- External grants: 2019: 37; 2020: 38; 2021: 19; 2022: 25; 2023: 33; 2024: 34; 2025: 29; 2026: 24
- Expenditures: 2019: 134; 2020: 127; 2021: 112; 2022: 111; 2023: 114; 2024: 117; 2025: 116; 2026: 113
- Current: 2019: 79; 2020: 85; 2021: 83; 2022: 78; 2023: 77
- Development: 2019: 26; 2020: 28; 2021: 35; 2022: 36
- Domestic recurrent balance 1/: 2019: -46; 2020: -56; 2021: -60; 2022: -61; 2023: -55; 2024: -53; 2025: -52
- Recurrent fiscal balance (incl. budget support grants): 2019: 18; 2020: 0; 2021: -9; 2022: -1; 2023: -2; 2024: 2; 2025: -3
- Overall balance 2/: 2019: 13; 2020: 4; 2021: -11; 2022: -20; 2023: -12; 2024: -10; 2025: -15
- Financing: 2019: -13; 2020: -4; 2021: 11; 2022: 20; 2023: 12; 2024: 10; 2025: 15
- Of which: Revenue Equalization Reserve Fund (RERF): 2019: 6
- RERF closing balance (millions of A$):
- 2019: 1,153
- 2020: 1,172
- 2021: 1,353
- 2022: 1,194
- 2023 (Proj.): 1,115
- 2024 (Proj.): 1,200
- 2025 (Proj.): 1,291
- 2026 (Proj.): 1,390
- 2027 (Proj.): 1,512
- 2028 (Proj.): 1,640
- RERF per capita value (2006 A$):
- 2019: 7,322
- 2020: 7,262
- 2021: 8,032
- 2022: 6,547
- 2023 (Proj.): 5,713
- 2024 (Proj.): 5,871
- 2025 (Proj.): 6,053
- 2026 (Proj.): 6,262
- 2027 (Proj.): 6,550
- 2028 (Proj.): 6,829
- RERF balance (in percent of GDP):
- 2019: 457
- 2020: 454
- 2021: 447
- 2022: 370
- 2023: 311
- 2024: 313
- 2025: 323
- 2026: 334
- 2027: 350
- 2028: 365
- Cash reserve buffer 3/ (millions of A$):
- 2019: 180
- 2020: 278
- 2021: 216
- 2022: 198
- 2023 (Proj.): 175
- 2024 (Proj.): 172
- 2025 (Proj.): 168
- 2026 (Proj.): 163
- 2027 (Proj.): 159
- 2028 (Proj.): 155
- Closing balance (in percent of GDP): 108; 61; 42; 39 (periods as shown in table)
- In excess of 3‑months of current spending and LCDF (millions of A$): 118; 219; 144; 122; 95; 86; 80; 62; 54 (periods as shown in table)
- Balance of payments - Current account including official transfers (In millions of US$): 87; 21; 27; 32 (periods as shown in table)
- Current account (In percent of GDP): 40; 9; 8 (periods as shown in table)
- External debt (millions of US$) 4/: 157; 195; 22; 17; 23; 41; 53; 63 (periods as shown in table)
- External debt service (millions of US$): 1.5; 3.0; 3.5 (periods as shown in table)
- External debt service (In percent of exports of goods and services): 0.8; 1.3; 1.0; 1.1 (periods as shown in table)
- Nominal GDP (millions of A$): 2019: 252; 2020: 258; 2021: 303; 2022: 322; 2023 (Proj.): 358; 2024 (Proj.): 383; 2025 (Proj.): 400; 2026 (Proj.): 416; 2027 (Proj.): 432; 2028 (Proj.): 449
- Nominal GDP (millions of US$): 2019: 178; 2020: 228; 2021: 224; 2022: 248; 2023 (Proj.): 263; 2024 (Proj.): 273; 2025 (Proj.): 284; 2026 (Proj.): 295; 2027 (Proj.): 306
IMF Communications Department, Press Release No. 23/314, September 15, 2023 — Executive Board endorsed the staff appraisal on a lapse-of-time basis.