The authorities should make continued efforts to finalize the draft of an updated Public Financial Management Act, strengthen budget planning, publish fiscal reports on a more regular basis, execute effective controls over cash balances, and improve procurement controls. The timely implementation of the Integrated Financial and Management Information System (IFMIS) for budget execution and strengthening cash flow management is crucial. The authorities’ ongoing efforts to improve public financial management are commendable and should continue.
Fiscal sustainability could be further reinforced by greater revenue mobilization, development of a sustainable medium‑term fiscal framework that integrates rules‑based withdrawals from the Revenue Equalization Reserve Fund (RERF), and provisioning for climate change adaptation costs in the budget. In this regard, the authorities should consider consolidating recurrent spending and improving the targeting and efficiency of the social safety net. Kiribati’s volatile fishing revenues and dependence on donor grants underscore the importance of maintaining fiscal discipline. Risks to the outlook are mainly on the downside.įiscal consolidation would be necessary to reduce fiscal risks. Kiribati’s external position is assessed to be broadly in line with the level implied by fundamentals and desirable policies. Inflation has recently picked up due to a recovery in domestic demand, supply shortages, and elevated commodity prices and freight costs. Growth is projected to increase to 2.5 percent this year on the back of a resumption of large infrastructure projects and improved weather conditions. After registering a strong rebound in 2021, real GDP growth is estimated to have decelerated to 1.2 percent in 2022 mainly due to a domestic outbreak of COVID‑19 and the subsequent lockdown restrictions. Kiribati’s economy continued to expand after the removal of all COVID‑19 restrictions in the second half of 2022. In concluding the 2023 Article IV consultation discussions with Kiribati, Executive Directors endorsed the staff’s appraisal, as follows: While the current account is expected to return to a surplus of 8 percent of GDP in 2023, the surplus will remain below the historical average, reflecting a projected increase in imports required for the resumption of infrastructure projects. Meanwhile, headline inflation is projected to increase to 8.6 percent in 2023, due to the low base in the first half of 2022, and the delayed pass‑through of normalizing global commodity prices and freight costs. In the medium term, real GDP growth is projected to converge to its historical average of 2 percent. Real GDP growth is projected at 2.5 percent in 2023, as economic activities return to a more normal state with the resumption of large infrastructure projects and improved weather conditions. The recovery is expected to gain momentum in 2023. The current account is expected to swing from a surplus to a deficit of 4 percent of GDP in 2022 on the back of higher import prices and lower fishing revenues. Inflation has increased since the reopening and averaged 5.3 percent in 2022, mainly due to a recovery in domestic demand, supply shortages, and elevated commodity prices and freight costs. However, a severe drought affected the agricultural sector, and real GDP growth in 2022 is estimated to have slowed to 1.2 percent. The removal of these restrictions and subsequent border reopening in August 2022 have boosted growth. However, a domestic outbreak of COVID‑19 and the subsequent restrictions imposed during the first half of 2022 limited mobility and further delayed large infrastructure projects. Due to supportive fiscal policies, the economy recovered strongly in 2021, with real GDP growing 7.9 percent from a contraction of 1.4 percent in 2020. The economy continued to expand after the removal of all COVID‑19 restrictions in the second half of 2022. Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Kiribati and considered and endorsed the staff appraisal without a meeting on a lapse‑of‑time basis. IMF Executive Board Concludes 2023 Article IV Consultation with Kiribati
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