IMF Concludes 2026 Article IV Talks with Kiribati

Washington, DC: An International Monetary Fund (IMF) team, led by Ms. Natalija Novta, visited Tarawa, Kiribati for the 2026 Article IV Consultation during February 17-27, 2026. The discussions with the authorities covered recent developments, the economic outlook, and policy priorities. At the end of the visit, Ms. Novta issued the following statement:

"Economic activity in Kiribati has remained strong. Real GDP growth is estimated at 4.3 percent in 2025, following 4.6 percent in 2024, driven by consumption and public investment. Inflation rose to around 6.5 percent in 2025 following long‑overdue and welcome fuel and electricity tariff reforms. After this one-off price level adjustment, inflation is expected to moderate quickly.

"Fiscal policy was broadly neutral in 2025, with the overall deficit at 14 percent of GDP financed by withdrawals from the Revenue Equalization Reserve Fund (RERF), broadly unchanged from 2024. The copra subsidy increase (from 6 to 9 percent of GDP) was balanced by improved excise tax collection. Public debt fell to 8 percent of GDP in 2025 and is assessed as sustainable, but the risk of debt distress is considered high due to long-term climate-related vulnerabilities. The external position is substantially weaker than the level implied by fundamentals and desirable policies, with the current account deficit estimated at 18.8 percent of GDP in 2025, amid persistently elevated imports.

"The near‑term outlook remains favorable, although gradually weakening over the medium term due to structural constraints. Real GDP growth is projected to moderate to about 3.2 percent in 2026 with public consumption and infrastructure projects continuing to drive activity, before converging to around 2 percent over the medium term. Inflation is expected to moderate to about 3.5 percent in 2026 and decline to about 1.8 percent over the medium term. The fiscal and current account deficits are both projected at around 15 percent of GDP in 2026, remaining elevated over the medium term.

"Risks to the outlook are tilted to the downside. Reliance on RERF withdrawals based on annual returns can exacerbate revenue volatility and hamper economic management. External risks include global financial market volatility and correction, commodity price fluctuations, geopolitical tensions that raise import prices and shipping costs, all of which could threaten fiscal and external sustainability. Climate‑related shocks remain a persistent threat, particularly through their impact on fishing revenues and infrastructure.

"Pursuing a sustained growth-friendly fiscal consolidation is critical to preserve long‑term sustainability while funding the development agenda. Adopting a balance‑based RERF withdrawal rule and integrating RERF operations into a strengthened medium‑term fiscal framework would allow effective use of countercyclical fiscal policy and support improved investment planning. Efforts to raise fishing revenues, decrease tax expenditures, and increase excise taxes would support the fiscal consolidation.

"A substantial expansion of broad social benefits over the last five years has contributed to a remarkable reduction in poverty and lifted overall human development. Broad-based social benefits should, however, be reviewed regularly with a view to enhance their efficiency and targeting. This would further support the fiscal consolidation while safeguarding gains in poverty reduction.

"The government's ongoing efforts to further develop institutional capacity and implement structural reforms should continue. In the fiscal area, reforms should focus on improving the medium‑term fiscal framework, enhancing fiscal discipline and public investment planning. Establishing a sound debt‑management framework and strengthening capacity to assess loan proposals and monitor risks, including in SOEs and JVs, is essential to maintain fiscal sustainability. To promote private sector development and diversification, establishing financial sector supervisory capacity and continuing to close infrastructure and human development gaps remain essential.

"We would like to thank the authorities and other stakeholders for their warm welcome and for productive discussions and engagement. The IMF stands ready to continue to support the government's development goals through macroeconomic policy advice and capacity development."