On July 9, 2025, the Executive Board of the International Monetary Fund (IMF) concluded its Article IV consultation with Kiribati. The board endorsed the staff appraisal without a meeting.
Kiribati's real GDP grew by an estimated 5.3% in 2024, nearing pre-COVID trends. This growth was largely driven by public sector expansion, while private production remained subdued. Inflation moderated in 2024 but began to rise in early 2025 due to increases in fuel prices and electricity tariffs. Fiscal policy was expansionary in 2024, with increased expenditures supporting a wage bill increase and a slight decline in fishing revenues as a share of GDP. The sovereign wealth fund's withdrawal rule was relaxed to support government spending priorities.
Real GDP growth is expected to moderate to around 3.9% in 2025 and gradually decline over the medium term. Economic activity this year is anticipated to be driven by public consumption and ongoing infrastructure projects. Productivity and population growth are expected to remain subdued, impacting medium-term growth. Inflation is projected to rise to 7.8% due to one-off price increases but should moderate over time. The current account deficit is expected to narrow mainly due to lower global commodity prices, while efforts are underway to contain current expenditures and reduce the fiscal deficit.
The IMF Executive Directors noted that Kiribati's economy has shown resilience despite repeated shocks. They acknowledged Kiribati's long-term development agenda focusing on infrastructure, social benefits, financial inclusion, and small businesses like copra farmers. Increases in electricity tariffs and fuel prices were deemed necessary for market alignment but are projected to temporarily raise inflation levels.
Risks have increased for Kiribati, both domestically and externally. Domestically, weak financial market returns could impact planned withdrawals from the sovereign wealth fund for 2026, potentially leading to unplanned fiscal consolidation and reduced public investment. Externally, risks include commodity price volatility and systemic financial instability that could affect fiscal sustainability through impacts on imports, interest revenues from the sovereign wealth fund, remittances, and growth.
The IMF recommends countercyclical fiscal policies integrated with a balance-based withdrawal rule for the RERF (Revenue Equalization Reserve Fund) as a way forward for consistent development needs fulfillment and social benefit provision. A credible fiscal consolidation plan with improved public investment efficiency is needed over the medium term for debt anchoring and higher climate adaptation investments.
Strengthening institutional capacity alongside human capital development remains crucial for sustained progress in Kiribati’s development agenda. Continued focus on strengthening public financial management systems is welcomed by the IMF directors.
Improving national statistics quality continues as an area of focus; however significant improvements have been noted over time.