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International Monetary Fund. Fiscal Affairs Dept.
This technical assistance mission assessed Kiribati’s agricultural output price scheme that subsidizes the production of copra (dried coconut). The mission estimates that subsidies in 2023 amounted to 7.8 percent of GDP. The scheme’s technical and allocative inefficiencies, incidence in rural areas, and high fiscal cost, could be mitigated in the short- and medium term, by scaling back the subsidies, replacing them in part with cash transfers and public goods provision in the outer islands, securing fiscal savings in the process, and introducing competitive elements in the copra value chain.
International Monetary Fund. Fiscal Affairs Dept.

This technical assistance mission assessed Kiribati’s agricultural output price scheme that subsidizes the production of copra (dried coconut). The mission estimates that subsidies in 2023 amounted to 7.8 percent of GDP. The scheme’s technical and allocative inefficiencies, incidence in rural areas, and high fiscal cost, could be mitigated in the short- and medium term, by scaling back the subsidies, replacing them in part with cash transfers and public goods provision in the outer islands, securing fiscal savings in the process, and introducing competitive elements in the copra value chain.

International Monetary Fund. Asia and Pacific Dept
International Monetary Fund. Asia and Pacific Dept

IMF Country Report No. 24/103

International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper focuses on a case study on copra subsidy in Kiribati. The copra subsidy, disbursed as a minimum support price, is a major part of the social safety net in Kiribati. The subsidy has multiple purposes—including as a means to transfer resources to the outer islands and to stem migration to the capital. The horizontal diversification model shows that a higher subsidy on copra diverts production and labor towards copra but lowers overall income. The vertical diversification model demonstrates how a subsidy on a primary product increases its supply but reduces production of the final good. Considering the benefits, the government could boost the subsidy’s efficiency, replace the scheme with a poverty-targeted social assistance program, or impose a cap on payments. Development partners, including the IMF and the World Bank, stand ready to provide support in both areas as needed.
International Monetary Fund. Asia and Pacific Dept
The 2024 Article IV Consultation with Kiribati discusses that the economy strengthened after the removal of all coronavirus disease 2019 restrictions in the second half of 2022. Kiribati is among the most vulnerable countries to the effects of climate change. Infrastructure gaps compound already challenging constraints imposed by distance and dispersion, limiting the development of the private sector in the state-dominated economy, and cementing its reliance on imports, especially for essential commodities such as food and fuel. IMF team recommended initiating an ambitious fiscal consolidation effort through scaling back recurrent spending and strengthening the fiscal policy framework. It is also imperative to implement structural reforms to raise private sector employment and investment, enhance export competitiveness, close infrastructure and human capital gaps, expand financial access, better utilize natural resources, and strengthen institutions and governance. Additionally, it is required to continue capacity development to produce high-quality statistics in a timely manner to support data-driven policy formulation.
International Monetary Fund. Asia and Pacific Dept

1. Kiribati’s economy recovered strongly from the pandemic on the back of supportive fiscal policies. After a mild, pandemic-inflicted recession followed by a strong recovery, the economy is estimated to be about 17 percent larger in 2023 compared to 2019. This recovery is attributed to a substantial increase in the government’s recurrent spending from 2019 to 2023, mainly on subsidies and grants. The authorities introduced unemployment benefits (covering about 70 percent of the working age population) in 2020 and leave grants for the private sector in 2023. In addition, they bolstered existing support schemes such as the senior citizen benefit and copra subsidy. Notably, Kiribati has one of the highest recurrent spending to GDP ratios in the world (at 64 percent on average over 2019-23), surpassing most Pacific Island countries (PICs); this spending is largely financed by fishing revenue,1 budget support from development partners, and tax revenues. State-owned enterprises (SOEs) operate across a wide range of industries such as utilities, transportation, housing, and financial services. Parliamentary elections are expected around August2024, followed by presidential elections approximately two months later.

International Monetary Fund. Asia and Pacific Dept

Selected Issues