Kiribati Embarks on Ambitious Reforms to Boost Post-COVID Recovery

Washington D.C. - The International Monetary Fund (IMF) has released a report highlighting the need for Kiribati to undertake significant reforms to boost its post-COVID recovery and promote long-term economic resilience.

Tax Reforms

The government of Kiribati is taking steps to revise its dividend policy to ensure that state-owned enterprises (SOEs) comply with their dividend payment obligations to the government. Additionally, the authorities are:

Increasing the progressivity of personal income tax
Streamlining corporate income tax
Simplifying the tax regime for small businesses

Fiscal Regime and Economic Diversification

Kiribati is reviewing its tax policy to align its tax rates with international levels, incentivizing private sector investment. The government is also:

Formulating a deep seabed mining fiscal regime
Leveraging participation in the Parties to the Nauru Agreement (PNA) to broaden the vessel day scheme and maximize fishing revenue potential

Public Financial Management

To improve public financial management, the authorities are prioritizing near-term reforms, including:

Developing credible budgets
Executing in-year controls over expenditure and revenue
Consolidating government bank accounts

This will help ensure that public spending is more effective and efficient.

Economic Diversification

The report emphasizes the importance of economic diversification to weather future shocks. Kiribati’s economy is highly concentrated, mainly relying on fisheries and copra, and the authorities are encouraged to:

Explore new product lines and quality upgrades
Develop sustainable fishing methods and state-of-the-art processing facilities

Business Environment and Human Capital

To achieve this goal, the government will need to:

Improve the business environment
Develop human capital by enhancing training opportunities and completing submarine fiber-optic cables linking Kiribati to the global submarine cable network
Enhance access to credit through improving land access procedures and dispute resolution mechanisms

Strengthening Public Finances

The report concludes that an overall strategy for setting SOEs on a more commercial and sustainable footing will strengthen public finances. Furthermore, continued efforts are needed to:

Strengthen SOE governance and oversight
Build capacity in the SOE monitoring unit
Phase out SOE exemptions of the VAT and reduce subsidies

IMF Support

The IMF commends Kiribati’s efforts to address economic challenges caused by the pandemic and its commitment to implementing economic reforms for greater resilience. The Fund stands ready to continue supporting the government’s reform efforts through policy advice and capacity development.

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