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Kiribati’s Economic Recovery Plan Focuses on Reforms and Diversification

The International Monetary Fund (IMF) has recently concluded a mission to Kiribati, where the authorities are working to implement economic reforms aimed at strengthening public finances, promoting private sector growth, and diversifying the economy.

Key Measures

To achieve these goals, the key measures being taken include:

  • Revising the dividend policy for state-owned enterprises (SOEs) to ensure compliance with government dividend payment obligations
  • Overhauling the tax regime to:
    • Increase progressivity of personal income tax
    • Streamline corporate income tax
    • Simplify taxes for small businesses
  • Increasing excise taxes on tobacco and fuel to address environmental impact and fund climate adaptation costs
  • Reviewing tax policy to align with international levels, aiming to incentivize private sector investment

Public Financial Management (PFM)

The IMF has emphasized the importance of improving PFM to make public spending more effective in boosting post-COVID recovery. Priorities include:

  • Developing credible budgets
  • Executing in-year controls over expenditure and revenue
  • Centralizing cash balances to optimize investment returns

Economic Diversification

The mission also highlighted the need for economic diversification through a more dynamic private sector, which could be achieved by:

  • Upgrading fishing exports
  • Investing in renewable energy
  • Exploring deep sea mining opportunities while ensuring environmental safety
  • Human capital development to promote diversification and create employment opportunities

Supporting Private Sector Growth

To support the private sector’s growth, the authorities plan to:

  • Enhance connectivity through better air transportation and shipping services
  • Complete submarine fiber-optic cables linking Kiribati to the global network
  • Build human capital by enhancing training opportunities

Strengthening State-Owned Enterprises (SOEs)

The IMF has praised the government’s efforts to strengthen SOEs, including:

  • Commercial mandate
  • Medium-term plans for financially sustainable delivery of utilities
  • Governance reforms
  • Phasing out SOE exemptions from Value-Added Tax (VAT)
  • Reducing subsidies to level the playing field with the private sector

Conclusion

The IMF has welcomed Kiribati’s commitment to implementing economic reforms to promote resilience and growth in the face of ongoing pandemic challenges.

Contact:

Pemba Sherpa IMF Communications Department Phone: +1 202 623-7100 Email: MEDIA@IMF.org @IMFSpokesperson