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© 2011 International Monetary Fund
May 2011
IMF Country Report No. 11/113
Kiribati: 2011 Article IV Consultation—Staff Report, Informational Annexes, Debt Sustainability Analysis, Public Information Notice on the Executive Board Discussion, and Statement by the Executive Director for Kiribati
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the Article IV consultation with Kiribati, the following documents have been released and are included in this package:
The staff report, Informational Annexes, and Debt Sustainability Analysis for the 2011 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on February 22, 2011, with the officials of Kiribati on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on April 18, 2011. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
A Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its May 2, 2011 discussion of the staff report that concluded the Article IV consultation.
A statement by the Executive Director for Kiribati.
The document(s) listed below have been or will be separately released.
Statistical Appendix.
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
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International Monetary Fund
Washington, D.C.
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KIRIBATI
STAFF REPORT FOR THE 2011 ARTICLE IV CONSULTATION
April 18, 2011
KEY ISSUES:
Context and growth prospects. The economy has emerged from the 2008–09 recession with strong forward momentum. Key externally financed infrastructure projects are expected to spur growth over the next few years. The main challenge is to manage the investment boom that is underway without creating inflationary pressures. Downside risks are mainly external and relate to higher inflation pressures from a further escalation of international fuel and food prices and a stalled global recovery that would hit Kiribati’s remittances and wealth funds. These are balanced by the potentially faster rebound in domestic demand driven by large public investments in the pipeline. Impact of food and fuel prices. Further increases would pose a challenge for Kiribati, but there are some mitigating factors compared to the 2008 spike. The price of rice (the main food import) is still well below the 2008 peak. The strong appreciation of the Australian dollar has helped mitigate imported inflation pressures.
Achieving a sustainable growth path. Productivity gains from infrastructure investments will prove transitory if progress in fiscal and structural reforms lags behind. On the fiscal side, preserving the Revenue Equalization Reserve Fund (RERF) is key to ensure fiscal sustainability and intergenerational fairness through fiscal consolidation once key public projects in the pipeline are completed. Over the medium term, to better anchor fiscal plans, the government should aim to stabilize the real value of the RERF in per capita terms. To shift to a high growth path hinging on a vibrant private sector, the implementation of the structural reform agenda should be accelerated.
Safeguarding financial stability. Enhancing competition in the banking sector is crucial to boost private activity. The authorities’ plans to revitalize the Development Bank of Kiribati (DBK) in the medium term are welcome.
Enhancing external competitiveness and stability. Securing grant financing and containing fiscal deficits are key to ensure external debt sustainability, as the joint IMF-WB Debt Sustainability Analysis (DSA) points out.
Data provision has some shortcomings, but is broadly adequate for surveillance. Significant progress has been made in the timeliness of core macroeconomic data since the 2009 Article IV. GDP and BOP data have been recently revised with Pacific Financial Technical Assistance Centre (PFTAC) assistance, but still suffer from shortcomings. The authorities have requested additional technical assistance in these areas.
Approved By
Kenneth Kang and Thomas Dorsey
Discussions took place in Tarawa from February 15–22, 2011. The staff team comprised Ms. Tumbarello (head), Ms. Maslova, Mr. Yi Xiong (all APD), Mr. Haque (World Bank), and Mr. Tora (AsDB). Ms. Tira (OED) participated in the discussions.
CONTENTS
INTRODUCTION
RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK
A. From Crisis to the Recovery
B. Outlook and Risks
POLICIES TO ENSURE SUSTAINABLE GROWTH
A. Fiscal Policy
B. Structural Reforms—Supporting Private Sector Growth
C. Safeguarding Financial Sector Stability
ADDRESSING EXTERNAL COMPETITIVENESS AND SAFEGUARDING EXTERNAL STABILITY
STAFF APPRAISAL
BOXES
1. Poverty Trends in Kiribati
2. The Impact of High Fuel and Food Prices
3. Prospects for Fishing License Revenues
4. Financial Sector Developments: The Provident Fund and Kiribati Development Bank
FIGURES
1. The Setting in a Cross-Country Context
2. Kiribati: From Crisis to Recovery
3. The Medium-term Outlook
TABLES
1. Millennium Development Goals, 1990–2009
2. Selected Economic Indicators, 2007–12
3. Summary of Central Government Operations, 2007–12
4. Medium-Term Projections, 2009–16
5. Balance of Payments, 2007–16
6. Balance of Payments, 2007–16 (in percent of GDP and GNI)
APPENDIX
I. Main Recommendations of the 2009 Article IV Consultation
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INTERNATIONAL MONETARY FUND
KIRIBATI
Prepared By
The Asia and Pacific Department
(In Consultation with Other Departments)
CONTENTS
I. FUND RELATIONS
II. RELATIONS WITH THE PACIFIC FINANCIAL TECHNICAL ASSISTANCE CENTRE (PFTAC)
III. BANK-FUND COLLABORATION
IV. RELATIONS WITH THE ASIAN DEVELOPMENT BANK
V. STATISTICAL ISSUES
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April 18, 2011
Approved By
Kenneth Kang and Thomas Dorsey (IMF)
Vikram Nehru and Jeffrey D. Lewis (WB)
Prepared By
The International Monetary Fund and The World Bank
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Public Information Notice (PIN) No. 11/56
FOR IMMEDIATE RELEASE May 17, 2011
International Monetary Fund
700 19th Street, NW
Washington, D. C. 20431 USA
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May 2, 2011
