Asia and Pacific > Kiribati
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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.
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.
KIRIBATI
KIRIBATI