Regions and Countries

	Table of Contents
p. 2 of 21 BACK | NEXT I. Country Performance Assessment A. Economic Performance Assessment B. Poverty Assessment C. Assessment of Socio-Environmental Performance D. Governance: Sound Development Management E. Implementation Assessment II. Country Operational Strategy III. Sector Strategies IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Kiribati : I. Country Performance Assessment

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A. Economic Performance Assessment

2. Except for a period of accelerating growth from 1994 to 1998, primarily due to expansionary Government spending, economic growth in Kiribati has been relatively poor since independence. In 1999, real Gross Domestic Product (GDP) is estimated to have increased only by 1.7 percent (see Appendix 1, page 1). The public sector continues to dominate the economy, accounting for about three-quarter of monetary GDP at factor cost. The combination of sluggish economic growth with an inability to provide adequate services to a growing population concentrated in South Tarawa has left Kiribati ranked eighth amongst ADB's 12 Pacific developing member countries in terms of the Human Development Index.

3. Despite these constraints, the external financial position of the country remains sound. The capital account is in surplus and gross official reserves (A$617 million, around $370 million), which includes the assets of the Revenue Equalization Reserve Fund (RERF), are sufficient to cover seven years of imports of goods and services. Government's financial position strengthened further recently as result of the increases in fishing license revenue and RERF earnings. Development expenditure is expected to increase by 40 percent on the 1999 level, partly as a result of the commencement of ADB financed Sanitation, Public Health and Environment Improvement (SAPHE) project¹, and the new parliament building to host the Pacific Forum Annual Meeting in October 2000.

4. Kiribati's economy is heavily dependent on Government expenditure and needs comprehensive structural changes to reach a level of sustainable economic growth. However, Kiribati economy does not face a fiscal or balance of payments crisis. The Medium Term Strategy (MTS), stresses the Government's objectives to reduce the relative size of core government, promote public enterprise reform, and facilitate private sector development, including the encouragement of foreign investment. While those goals are laudable, their implementation may prove to be a major challenge for the Government. The 1999 International Monetary Fund (IMF) Article IV consultation concluded that a clear plan for reform of public enterprises is needed. The IMF also indicated its strong support for downsizing the civil service and to remove barriers to trade and investments. If such plans are to be designed and successfully implemented, it will be necessary to gain the support of the people, and all levels of the Government.

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