Kiribati's government is considering changes to its copra subsidy program, a key part of its economic strategy. The current subsidy aims to reduce poverty, encourage residence on outer islands, and provide employment in the culturally significant copra industry. However, the program has been criticized for being fiscally inefficient.
A proposal suggests lowering the subsidy from A$4 to A$2 per kilogram and supplementing it with targeted cash transfers. This approach could potentially reduce poverty by 20% and save 30% of current expenses. Additional reforms include consolidating Kiribati Coconut Development Limited (KCDL) to restore profitability.
"Reducing the copra subsidy would also allow agriculture to diversify, and in doing so improve health and nutrition," states the executive summary of a report on this issue. To implement these changes, collaboration with development partners is recommended for establishing a targeted cash transfer system.
The report "Cultivating Shared Prosperity" highlights that while the copra subsidy reduces poverty, it becomes less effective as it grows larger. It finds inefficiencies in how subsidies are distributed among households. The suggested interim measure is capping subsidies per household at $142/month per adult equivalent.
Another report titled "Cracking the Nut" points out distortions caused by the copra subsidy in the sector's performance. Recommendations include reducing copra prices to market levels and encouraging private investment through secure land titles. The potential expansion into higher-margin goods like virgin coconut oil requires significant reforms.
The "New Sprouts" report examines how the copra subsidy affects other agricultural sectors. It notes that reliance on imported foods contributes to food insecurity and malnutrition due to crowded-out local production. Improving supply chains and scaling up technologies are seen as necessary steps toward market-oriented production.