Front Matter Page
IMF Country Report No. 13/158
KIRIBATI
2013 ARTICLE IV CONSULTATION
June 2013
Kiribati: 2013 Article IV Consultation—Staff Report; Informational Annex, 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 2013 Article IV consultation with Kiribati, the following documents have been released and are included in this package:
The staff report, Informational Annex, and Debt Sustainability Analysis for the 2013 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on April 8, 2013, 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 May 14, 2013. 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 29, 2013 discussion of the staff report that concluded the Article IV consultation.
A statement by the Executive Director for Kiribati.
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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©2013 International Monetary Fund
Front Matter Page
KIRIBATI
STAFF REPORT FOR THE 2013 ARTICLE IV CONSULTATION
May 14, 2013
Key Issues
Context. Donor projects, higher than average fishing license fees and remittances lifted growth in 2012. However, the structural fiscal imbalance remains excessively large. Lack of private sector development and underperforming state-owned enterprises (SOEs) have exacerbated structural problems. Since 2012, the government has been pursuing a broad range of reforms supported by the donor community to address Kiribati’s fiscal and structural challenges.
Policy Issues. Kiribati faces a number of key challenges: a) structural fiscal imbalances are large stemming mostly from insufficient revenue growth as well as expenditure pressures from significant infrastructure needs and non-performing public enterprises. Weaknesses in public financial management exacerbate the fiscal risks; b) Kiribati’s public finances and overall economy are vulnerable to external shocks from volatile fishing license revenues and financial exposure of its sovereign wealth and pension funds; c) Private sector involvement in the economy is small due to remoteness and weak business climate. This constrains growth and puts strain on public finances.
Key Policy Recommendations:
➢ Adhere to a fiscal policy framework that achieves a sustainable drawdown of the sovereign wealth fund in the long run. To implement such a policy framework, it is essential to: a) follow up with tax reform and strengthen tax compliance; b) strengthen public financial management, including by increasing the accuracy of short and medium-term fiscal projections and improving mechanisms for approval of government debt and guarantees.
➢ Continue reform of SOEs with the goal of improving their management and promoting commercialization of viable enterprises.
➢ Private sector development is a key element to both improving growth opportunities and reducing structural fiscal imbalances. Full utilization of Kiribati’s marine potential in particular is essential and involves developing a viable fishing industry beyond collecting license fees. Tourism and opportunities to work abroad also hold large promise. Removing impediments to doing business is also essential.
Approved By
Hoe Ee Khor and Peter Allum
Discussions were held in Kiribati. The mission met with President Anote Tong, Minister of Finance Murdoch, Secretary of Finance Beiatau, other senior government officials, and representatives from public enterprises and the private sector. The team comprised Mr. Dodzin (head), Ms. Rauqeuqe, Mr. Wu (all APD), and Ms. Shinagawa (STA). Mr. Fookes (ED office), Mr. Lototele (AsDB), Mr. Haque (World Bank), and Mr. Roger (PFTAC) also joined discussions.
Contents
BACKGROUND
OUTLOOK
POLICIES TO ACHIEVE FISCAL SUSTAINABILITY AND PROMOTE LONG-TERM GROWTH
A. Fiscal Policy
B. State-owned Enterprises Reforms
C. Increasing Private Sector Growth Opportunities
D. Financial Sector
E. External Competiveness and Exchange Rate Assessment
STAFF APPRAISAL
BOXES
1. Restoring Fiscal Sustainability
2. Utilizing Fishing Resources
3. Supporting Private Sector Growth
FIGURES
1. The Setting in a Cross-Country Context
2. Fiscal Dynamics
TABLES
1. Selected Economic Indicators, 2009–14
2. Summary of Central Government Operations, 2009–18
3. Kiribati: Medium-Term Projections, 2010–18
4. Kiribati: Balance of Payments, 2009–18
5. Kiribati: Summary of Central Government Under Different Scenarios, 2010–33
APPENDIX
RISK ASSESSMENT MATRIX
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KIRIBATI
STAFF REPORT FOR THE 2013 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
May 14, 2013
Prepared By
The Asia and Pacific Department
(In Consultation with Other Departments)
Contents
FUND RELATIONS
RELATIONS WITH THE PACIFIC FINANCIAL TECHNICAL ASSISTANCE CENTRE
BANK-FUND COLLABORATION
RELATIONS WITH THE ASIAN DEVELOPMENT BANK
STATISTICAL ISSUES
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Public Information Notice (PIN) No. 13/65
FOR IMMEDIATE RELEASE
June 6, 2013
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Washington, D. C. 20431 USA
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Fax 202-623-6772
