ADB's Work in Kiribati

Composed of 33 small islands dispersed over 3.5 million square kilometers in the Pacific, Kiribati joined ADB in 1974.

Aerial view of Kiribati.

The economy is driven by construction associated with large, donor-financed investments and by strong revenues from fishing licenses. Kiribati has enjoyed sustained economic growth in recent times, averaging 3.9% from 2012 to 2018. The country’s economy is, however, highly vulnerable to external shocks and income volatility. It is exposed to extreme weather events and the impacts of climate change, and is dependent on imports and nontax revenues. Sources of external revenue include fishing license receipts, foreign aid, and investment income from Kiribati’s sovereign wealth fund (the Revenue Equalization Reserve Fund). Private sector development is constrained by the size and scale of the economy, the high costs of doing business, and the country’s widely dispersed population.

Since 1974, ADB has committed loans and grants totaling $96.97 million and technical assistance worth $20.02 million for Kiribati.

The South Tarawa Sanitation Improvement Sector Project will improve sanitation infrastructure, sewerage and maintenance capacity, and public hygiene.

To improve sanitation services and hygiene practices in Kiribati’s capital, ADB has provided financing for the South Tarawa Sanitation Improvement Sector Project. The project’s goal is to increase access to sanitation in the city from 64% of the population in 2014 to 80% by 2019. To provide greater access to safe water, ADB approved the South Tarawa Water Supply Project in 2019, which is cofinanced by the Green Climate Fund and the World Bank. With a total investment of $61.8 million, the project aims to develop water supplies from ground sources and rainwater harvesting, and use solar-powered seawater desalination by reverse osmosis.

The Kiribati Road Rehabilitation Project has reconstructed 32 kilometers of main roads and 8 kilometers of feeder roads across the country, with additional financing provided to reconstruct sections of the road from Betio to Bairiki. Cofinanced by the World Bank and the governments of Australia and Kiribati, this vital transport project has improved access to social services and employment opportunities for Kiribati’s people. It has also helped businesses on Tarawa to deliver their services more efficiently.

Road construction site in Tarawa.

Many of the infrastructure services in Kiribati are provided by stateowned enterprises. ADB supports the improvement of these infrastructure enterprises through the Kiribati Economic Reform Plan. The bank helps improve policy, tighten legal and institutional settings, implement the government’s privatization pipeline, and sharpen the commercial focus of stateowned enterprises.

Nonsovereign Operations

As a catalyst for private investments, ADB provides financial assistance to nonsovereign projects and financial intermediaries. Total commitments from ADB’s own funds (in equity and direct loans) in 2019 amounted to $3.00 billion for 38 transactions in economic and social infrastructure, the finance sector, and agribusiness. ADB also actively mobilizes cofinancing from commercial and concessional sources. In 2019, ADB mobilized $3.28 billion of long-term cofinancing and $3.69 billion of cofinancing in trade finance, microfinance, and supply chain finance programs. Total outstanding balances and commitments of nonsovereign transactions funded by ADB’s own resources stood at $13.78 billion as of 31 December 2019.

Financing Partnerships

Financing partnerships enable ADB’s development partners, governments or their agencies, multilateral financing institutions, and commercial organizations to participate in financing ADB projects. The additional funds are provided in the form of loans and grants, technical assistance, and other nonsovereign cofinancing such as B loans, risk transfer arrangements, parallel loans and equity, guarantee cofinancing, and cofinancing for transactions under ADB’s Trade Finance Program and Supply Chain Finance Program.

ADB began cofinancing operations in Kiribati in 1995. Since then, sovereign cofinancing commitments for Kiribati have amounted to $72.03 million for five investment projects, and $4.64 million for seven technical assistance projects.

Projects Cofinanced, 1 January 2014–31 December 2018

Operational Challenges

While ADB provides assistance for Kiribati to optimize its fiscal sustainability and stimulate private sector activity, the country faces intractable development constraints.

A shortage of natural resources—including critical ones such as land and fresh water—hampers development, and this is exacerbated by having a sparse population scattered across numerous islands. International markets are difficult for Kiribati to access, and there is little potential for economies of scale, with the outer islands functioning at only a subsistence level. The country’s small, open economy is also heavily reliant on imports, including commodities such as food and fuel, leaving it vulnerable to international price hikes.

Political instability and changes in government personnel pose a challenge to ADB operations in Kiribati, as well as to the implementation of government reforms. Kiribati also faces significant challenges in delivering education and health services for children, generating employment growth, and adapting to climate change.

Future Directions

ADB operations in Kiribati are covered in the ADB country operations business plan, 2020–2022 for 11 Pacific island countries, which is aligned with ADB’s Pacific Approach, 2016–2020. The business plan targets improvements to Kiribati’s growth prospects and living standards, in line with the broad objectives of Kiribati’s Vision 2016–2036.

Solar street lighting installed in major roads in Tarawa

ADB assistance to Kiribati will focus on long-term investments to improve water supply, outer-island ports, renewable energy, and business development. ADB will continue to strengthen capacity on public sector management, for sound economic management and implementation of state-owned enterprise reforms.