Press Release No. 07/35

Press Release: Statement by IMF Staff Mission to Kiribati

March 1, 2007

The following statement was issued on February 28, 2007 in Tarawa at the conclusion of a staff mission of the International Monetary Fund (IMF):

"An IMF mission led by Ms. Nita Thacker, Senior Economist in the Asia and Pacific Department, completed their visit to Tarawa today for the 2007 Article IV Consultation discussions. The team had many useful discussions with the government's economic team and exchanged views with the government on the economic outlook, policy priorities, and progress in implementing the government's economic agenda. Based on these discussions the team will prepare a staff report, scheduled to be presented to the IMF's Executive Board in late April.

"Kiribati faces many economic challenges arising from the country's remote geographical location, the impact of global climate changes and the need to create jobs and promote growth for an expanding population. The government is tackling these issues, but heavy dependence on external sources of revenues, including fishing license fees and remittances (which have been declining), makes its job difficult. As a result, fiscal deficits have averaged 20-25 percent of GDP in the last three years. These deficits have required large withdrawals from the Revenue Equalization Reserve Fund (RERF). The per capita value of the RERF has declined from its peak in 2000, although it remains above the informal benchmark of maintaining it at the 1996 real per capita value.

"Looking ahead, stronger efforts to reduce the fiscal deficit by increasing revenues from domestic sources and rationalizing spending, including by stemming losses at public enterprises, will help to safeguard the resources of the RERF. In addition, the government's strategy to create a conducive environment for the private sector will help to generate both growth and jobs while complementing the fiscal adjustment.

"The mission team would like to thank the authorities for their cooperation and hospitality and wishes them well."