Countries and Regions

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p. 4 of 4 BACK | NEXT I. Development Situation II. Implementation of the Country Strategy and Program III. Portfolio Management Issues IV. Country Performance and Lending Level

Country Strategy and Program Update 2002-2004: Kiribati

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IV. Country Performance and Lending Levels

A. Lending Level Proposed

34. Among the PDMCs, Kiribati scores relatively well in terms of performance criteria for allocating ADF resources. However, improvements are required in several areas, including (i) financial sector efficiencies and soundness, as the sector lacks a supervisory framework; (ii) environmental laws and implementation, pertaining to pollution of the water lens and the lagoon and solid waste management; (iii) a framework for poverty monitoring, especially identification of the poverty line, awareness of poverty, and a poverty reduction strategy; (iv) enhancement of the economic capital of the poor through infrastructure in the outer islands and interisland transport; and (v) management and efficiency of public expenditures, public enterprise reform, and accountability.

35. For the near future, ADB and the Government expect some improvements in these indicators to allow Kiribati to maintain or even increase its ADF allocation. The monitored short-term indicators are (i) progress in implementing the SAPHE project; (ii) Government maintenance of fiscal discipline; and (iii) preparation of the budget for 2002 in output budgeting format.

36. Three scenarios were developed for allocation of ADF resources (Appendix 5). The low case scenario assumes that (i) the SAPHE project encounters major problems, (ii) fiscal discipline cannot be maintained, (iii) MFEP cannot produce its budget in output format, and (iv) no progress is made in the public sector reform. In this case, the ADF allocation for Kiribati will be about $6 million to $7 million for the next three years. The base case scenario assumes that (i) the SAPHE project proceeds smoothly, (ii) fiscal discipline is maintained, (iii) MFEP can produce its budget in output format, and (iv) some progress is made in the public sector reform. In this case, the ADF allocation for the next three years will be about US$8.0 million. The high case scenario assumes that (i) The SAPHE project progresses satisfactorily, (ii) fiscal discipline is maintained, (iii) MFEP produces an output budget with full allocation of costs to output and key performance indicators for benchmarking results, and (iv) significant progress is made in the public sector reform. In this case, the ADF allocation for the next three years will be about US$9 million to US$10 million.

37. The proposed loan program for the next three years assumes a base case, US$8 million, scenario with one loan in the pipeline for 2003. The timing of this loan may vary depending on progress achieved under SAPHE. Total amount of proposed TA is about US$1.70 million or an average of US$0.57 million per year. This program may be modified based on the performance as the operational cycle unfolds. A detailed listing of proposed projects in the pipeline is found in Appendix 5.

B. Loan Program

38. A single loan is programmed for 2003, the OIDP.

C. Technical Assistance and Economic and Sector Work Program

39. The proposed indicative operational program in Kiribati for 2001-2004 is shown in Table 2. Substantive economic and sector work is being carried out in Kiribati under the FEM2 TA. Additional sector work is carried out in FEM2 and through the TA associated with the OIDP. Major economic work–including the preparation of the 2001 Pacific economic report–will take place under proposed TA to support poverty reduction. Appendix 6 summarizes the economic and sector work program.

D. Summary of Changes

40. There are few changes in the program from the previous Kiribati country assistance plan, for 2001–2003.The strategy remains basically the same with more emphasis on poverty reduction. The proposed loan and TA activities have not been changed significantly. The main change is the postponement of the proposed OIDP from 2002 to 2003 due to absorptive capacities of the counterpart, the Ministry of Home Affairs and Rural Development. The loan project brief and TA concept papers are given in Appendix 7.

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