KIRIBATI/IMF Executive Board Concludes 2026 Article IV Consultation with Kiribati

IMF Executive Board Concludes 2026 Article IV Consultation with Kiribati

FOR IMMEDIATE RELEASE

Kiribati’s recent GDP growth has exceeded that of other Pacific Island countries and poverty has declined significantly. Growth is projected to moderate to about 3.1 percent in 2026 but the outlook remains highly uncertain amid external shocks and persistent structural challenges.
Fiscal policy can help mitigate the impact of the energy price shock on vulnerable households with temporary, targeted transfers, while allowing domestic fuel prices to gradually adjust. A sustained growth-friendly fiscal consolidation over the medium term is needed for long-term debt sustainability.
Strengthening institutional capacity, by establishing a debt management framework, improving public financial management, revenue administration, and the quality of national statistics, is essential for continued growth and private sector development.

Washington, DC – May 15, 2026: On May 8, 2025, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Kiribati.^[1]

Kiribati has experienced strong GDP growth and significant poverty reduction in recent years. Real GDP growth in 2025 is estimated at 4.3 percent, supported by consumption and public investment. Average inflation rose to 6.5 percent in 2025 following a needed one‑off adjustment of domestic energy tariffs and, after beginning to recede, is under renewed pressure amid higher fuel and shipping costs triggered by the Middle East war. The authorities have pursued an ambitious development agenda despite external shocks and structural challenges and have substantially reduced poverty by increasing social benefits. Fiscal policy was broadly neutral in 2025 and external public debt declined to 8 percent of GDP. Nonetheless, despite the low public debt, Kiribati risk of debt distress is assessed to be high due to climate-related vulnerabilities and implicit contingent liabilities.

Real GDP growth is expected to moderate to around 3.1 percent in 2026 and to gradually decline to around 2 percent over the medium term. While the near‑term outlook remains favorable, uncertainty is high. Risks, primarily from a prolonged war in the Middle East and associated trade disruptions, as well as from a sharp tightening in financing conditions, are tilted to the downside. In the IMF’s April 2026 World Economic Outlook (WEO) reference scenario assuming a temporary energy shock, economic growth is expected to continue to be driven by ongoing infrastructure projects and consumption, with social benefits supporting the vulnerable population. Inflation is projected to remain elevated in 2026 due to the war in the Middle East but subside over the medium term as Kiribati shifts to using more solar power for electricity generation. The fiscal deficit is expected to widen in 2026 with increased subsidies to manage the impact of higher oil prices.

Executive Board Assessment^[2]

Executive Directors welcomed Kiribati’s resilient economic growth, and the authorities’ continued focus on improving human development outcomes that has supported an impressive decline in poverty since 2019. Directors emphasized that Kiribati is highly vulnerable to external shocks and risks remain tilted to the downside, including from a protracted war in the Middle East with persistently high commodity prices, trade disruptions, potential financial market volatility, and climate shocks. They stressed the need for continued prudent policies and reforms to strengthen resilience and safeguard macroeconomic stability, supported by capacity development as needed from the Fund and other development partners.

Directors agreed that a growth‑friendly fiscal consolidation is essential over the medium term to rebuild buffers and safeguard debt sustainability while preserving priority spending. To achieve this, Directors concurred that Kiribati could gradually raise revenues and reduce tax expenditures in the fisheries sector and increase excise taxes. The fiscal response to the shock from the war should focus on protecting vulnerable households with targeted transfers while allowing domestic fuel prices to gradually adjust. Over the medium term, when cyclical conditions allow, the authorities could usefully focus on rationalizing recurrent spending on subsidies, improving efficiency and sustainability of social benefits and strengthening fiscal institutions. Directors agreed that adopting a balance‑based withdrawal rule from the sovereign wealth fund would help preserve its real value, facilitate countercyclical fiscal policy and support medium‑term climate adaptation investments.

Directors underscored the importance of continued institutional capacity building, including strengthening revenue administration, public financial management and debt management. They encouraged the authorities to monitor risks from contingent liabilities and ensure that borrowing by state‑owned enterprises and joint ventures is consistent with development objectives and long‑term debt sustainability.

Directors emphasized the importance of advancing structural reforms to support private sector development and diversification, strengthen human capital, and build climate‑resilient infrastructure. They called for strengthening regulatory and supervisory institutions to safeguard financial stability and also encouraged continued reforms to improve governance, transparency, and the quality of national statistics, including through continued capacity building from the Fund.

Table 1. Kiribati: Selected Economic Indicators, 2024–28

Per capita GDP (2024e): US$2,695.

Demographic: Population (2024e): 127,317; Life expectancy at birth (2022): 67.7.

Poverty in percent of population (2023-24): Below $2.15 a day: 0.04; Below the national poverty line: 5.5.

IMF quota: SDR 11.2 million.

Main export products: Crude coconut oil, frozen tuna, and copra.

	2024	2025	2026	2027	2028
		Est.		Proj.
Real GDP (percent change)	4.6	4.3	3.1	2.4	2.2
Consumer prices (percent change, average)	2.5	6.5	4.5	3.1	2.5
Inflation (end of period)	2.9	6.3	3.3	2.5	2.5
Central government finance (in percent of GDP)
Revenue and grants	72	74	100	79	81
Total domestic revenue	62	58	60	59	58
Of which: fishing revenue	40	38	39	38	38
External grants	10	15	40	20	22
Expenditures	86	88	116	94	93
Current	63	66	64	62	61
Development	23	23	52	32	32
Domestic recurrent balance 1/	-42	-45	-43	-41	-41
Recurrent fiscal balance (incl. budget support grants)	0	-1	-2	-2	-2
Overall balance 2/	-14	-14	-17	-15	-13
Financing	14	14	17	15	13
Of which: Revenue Equalization Reserve Fund (RERF)	15	15	13	7	6
Credit
Credit to GDP (in percent of GDP)	12	13	…	…	…
RERF
Closing balance (in millions of A$)	1600	1677	1708	1773	1855
Per capita value (in 2006 A$)	7786	7811	7642	7617	7655
Balance (in percent of (GDP)	308	310	300	299	301
Cash reserve buffer 3/
Closing balance (in millions of A$)	264	263	240	240	240
Closing balance (in percent of GDP)	51	49	42	40	39
In excess of 3-months of current spending and LCDF (in millions of A$)	164	156	127	128	129
Balance of payments
Current account including official transfers (in millions of US$)	-60	-66	-71	-70	-68
(In percent of GDP)	-17.4	-18.8	-17.7	-16.8	-15.7
External debt (in millions of US$) 4/	29	29	31	66	91
(In percent of GDP)	9	8	8	16	21
External debt service (in millions of US$)	2.2	2.2	2.2	2.2	2.5
(In percent of exports of goods and services)	0.6	0.6	0.6	0.5	0.6
Exchange rate (A$/US$ period average)	1.5	1.6	…	…	…
Real effective exchange rate (period average)	83	87	…	…	…

Memorandum items:
Nominal GDP (in millions of A$)	520	542	569	593	616
Nominal GDP (in millions of US$)	343	349	401	417	431

Sources: Kiribati authorities; World Bank; and IMF staff estimates and projections.

1/ Domestic recurrent balance excludes fishing revenue, grants, and development expenditure.

2/ Overall balance in the table is different from official budget because withdrawals from the RERF are classified as financing.

3/ Cash reserve buffer includes the government’s operational account and cash reserve account.

4/ The coverage is public external debt only.

[1] Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.

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