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Annual Report 2001

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Kiribati

Economic performance

Kiribati’s economy grew by 1.5% in 2001, after a contraction of 1.7% in 2000. Much of the increase was attributed to increased government and donor spending, a recovery in copra production, and a rise in construction activity. The inflation rate increased from 0.9% in 2000 to 7.1% in 2001, largely due to the delayed effect of the rise in local oil prices and fall in the Australian dollar (A$). In 2001, imports are estimated to have declined by 9.0%, while commodity exports fell by 33.2%. The trade deficit is estimated to have reached nearly 70.0% of GDP, slightly higher than the 67.5% level in 2000, with the current account surplus falling to around 4.4% of GDP. The Revenue Equalization Reserve Fund, which accounted for almost all external assets, decreased from A$658 million at end-2000 to A$635 million at end-2001. This is equivalent to $329 million, over 10 years of imports or 8.2 times GDP.

The fiscal position weakened in 2001. The overall budget balance deteriorated from a deficit of 0.8% of GDP in FY2000 to a projected deficit of 37.5% of GDP in 2001. This increase in the deficit resulted primarily from a higher wage and salaries bill, rising subsidies to government-owned businesses and the copra industry, payments for a landing craft, and a larger government contribution to development projects.

ADB operations

Operational strategy: ADB’s strategy envisages two main priorities in its assistance program: water assessment and management in South Tarawa and the outer islands, and support for establishing and expanding trust funds to provide sustainable financing of basic services.

Policy dialogue: ADB assists the Government in improving its water and environmental management in South Tarawa and in identifying policy changes for outer island development. Loans and technical assistance: No loans were approved in 2001. ADB approved one advisory technical assistance grant amounting to $500,000 for strengthening development strategies and supporting poverty reduction.

Project implementation: Since joining ADB in 1974, Kiribati has received six loans, of which one was active at the end of 2001. Contract awards totaled $300,000, bringing the cumulative figure to $7.0 million. The contract award ratio was 5.4%, lower than the ADB-wide average of 14.8%. Disbursements during the year totaled $1.4 million, bringing cumulative disbursements to $6.3 million. The disbursement ratio was 16.9%, lower than the ADB-wide average of 20.5%.

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