ADB-Kiribati Partnership Strategy
Maintaining fiscal sustainability, improving the business climate, and dealing with the effects of climate change are Kiribati’s main development challenges. The economy is highly vulnerable to shocks and heavily dependent on external sources of revenue and imported food and fuel. The public sector dominates the economy, accounting for as much as 50% of gross domestic product and nearly 80% of jobs in the formal sector. The private sector remains small and has struggled to grow because of high business and investment costs due to the country’s remoteness, dispersion of population across dozens of islands, and a deteriorating and/or underdeveloped infrastructure, which has led to frequent shortages of power, water, food, and fuel supplies.
After a period of volatility, Kiribati had its fifth year of consecutive growth in 2015. Growth has been driven in large part by construction associated with large donor-financed investments. An increase in fishing license fees has also underpinned greater public spending and a rebuilding of the Revenue Equalization Reserve Fund and fiscal buffers (the latter now equivalent to about 6 months of public spending). The government elected in March 2016 has placed particularly strong emphasis on using its strong revenue base to improve both services to the poorest (including the introduction of free education and child support) and outer island development (including the expansion of the copra subsidy).
The country operations business plan (COBP), 2017-2019 for Kiribati is aligned with ADB’s Pacific Approach, 2016-2020, which serves as the country partnership strategy, and the Midterm Review of Strategy 2020. The COBP supports the goals and objectives of the Kiribati Development Plan, 2016-2019. Since 2012, ADB has worked with other partners (the World Bank, Governments of Australia, and more recently New Zealand) to support the government’s efforts to improve both fiscal stability and management and the business climate. These measures are also the focus of the Kiribati Economic Reform Plan developed by the government and development partners; ADB supports its implementation through ongoing dialogue and policy-based lending.
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